Warren, MI · Member since 2015 · 140 posts · 36 votes
I have a rental property I purchased cash using my credit cards. I purchased it for 18k rehabbed it and now it appraised about 35k. The interest rates went up and I really don't want to sell for 35k I'll break even on my credit cards and still have to pay taxes on it being sold plus closing cost and etc. I have a tenant with a 1-year lease paying $775. I want to learn lease options but please let me know what are my options and your comments are appreciated. This is my first rental. No skin in the game.
I used the 3 credit cards to fund this deal which the first card is APR 16.15%, Interest paid TTD: $990.33, second card Apr 10.49% Intrest paid YTD: $57.70 and a checking line of credit at 14.90%. So I'm paying $200-300 in interest fees on each cc monthly. And I tried doing a cash out refi but most lenders don't like Detroit's market and they don't loan under 50K of the appraised value. Not to mention my credit has taken a hit due because I used my personal cc to fund this project. I just wanted to not sit on the bench and not take action but I'm learning a lot.
Delmas, respect brother. And here is why.
You took action, and now nobody can tell you that you are sitting on the sidelines. But more than that, it takes some courage to share things like this. Just like you, I did a my first deal (a flip in Houston), lost some money, and it wasn't a deal I should have even done, but I did it. Now we learn and move on. Sucks to put that out there for everybody to judge, so I appreciate you doing that.
Ignore the negativity in this thread. Focus on the useful information.
So you have already figured out your cost of funds. Use the BP calculator to run the rest of the equation, so we can deal in facts here. What are your taxes & insurance? Are you using a property manager? Are you allowing for upkeep and maintenance? Trying to determine if you are actually making any cash flow here -- I would think you would have to be, but how much?
Find your local REIA meet ups and go get to know some hard money lenders there. That isn't really what you need, but if you are cash-flowing, it might allow you to get into some kind of transition loan. And those HM guys will know what you are trying to do. You might also run into some private money guys there, also. Somebody will have a work-around solution.
It doesn't sound bad -- you are into this thing for $28K and the house has appraised for $35K. I mean, let's say you find a buyer for it at $35K, you pay roughly 10% in closing costs, realtor fees, etc... you still put a couple grand in your pocket. That's a lot of work to make a couple grand, but it beats losing money (believe me).
All good questions here -- what is the neighborhood like? Do you think it is on the rise, or just a warzone? Working class neighborhood next to a plant or factory, maybe? Might be worth hanging onto it for a while, long enough to do a refi, especially if there is some chance for appreciation.
San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
8y
@Delmas Edwards Depends how high the interest rates are. If too high, you may want to look into your options to pay off the credit cards and get into a lower rate type loan. Private lenders and/or partners are other options if you can find people willing to work with you. Good luck!
Well said. Anything is obtainable if you try hard enough. And there's nothing wrong with living in a vehicle lol (to account closed guy)! I was able to put away $8,000 a month doing that.
Investor · Sewickley, PA · Member since 2017 · 59 posts · 32 votes
8y
hi Delmas
I like your house! It is very appealing. There are many good options here, including selling the house if a buyer happens to come along quickly enough. I am most interested in Vincent T's suggestions, especially "rent to own" with you holding the note. this way, two families' dreams can come true, even if the banks don't believe in you. For our business, we were able to get the HELOC from our local credit union. They did access our credit score, so maybe this is a future option for you, rather than a right now option. Detroit survives..I believe it's on the way up. Look what is happening in Buffalo (my home town). Good luck to you.
Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
8y
My friend just got a consolation loan from some third party though credit karma to pay off his credit card debt, then since most credit cards report to the credit bureaus usually weekly, within a week his credit score shot up to 740. I assume because the consolation loan hasn't been reported to the credit bureaus yet and since all his credit cards are paid off it looks like he has no debt. So then I would use that sweet spot of having a high credit score and "no debt" to apply for a 0% APR for X months credit card or a HELOC if you are turned down the first time when your credit score was low.
Congrats on your first purchase and keep us posted on how it turns out.
Warren, MI · Member since 2015 · 140 posts · 36 votes
8y
So, guys, I have an Investor buyer that is going to pay 40K for my rental property. We suppose to close Jun 15th. I have learned a lot thanks to you guy here on biggerpockets. I will continue to buy and hold but I will make sure the numbers are right and to have a great exit strategy when using OPM. Thank you all!
Warren, MI · Member since 2015 · 140 posts · 36 votes
8y
@Victoria C. Navy Federal stated that my DTI was too high and I had a medical collection. So my realtor found some investors who want to buy it and hopefully close June 15th.
@Victoria C. Navy Federal stated that my DTI was too high and I had a medical collection. So my realtor found some investors who want to buy it and hopefully close June 15th.
This has been a helpful thread! I hope you've enjoyed many more investments!