Questions on first deal. Using a HELOC and hard money

[Matt Smith]

I just purchased a property in Tampa today. Got it for 239k cash only deal. It can be used as a rental or an easy flip. Its a 3/2 1260sqft block home. ARV is 360k with estimated repairs being only cosmetic at 10k. Rental comps are between 1800-2200. Bounced it off a few investor friends and all said it was a great deal. The part I need help with is the financing. I'll be using my HELOC for the down payment and rehab budget. The HELOC is at 3% right now until June 1, then it jumps to prime rate. I'm using hard money to carry the remaining balance of the loan. The interest rate on the hard money is 11%. I'm not crazy about that rate. That puts me at roughly $1900/month payments on the hard money and 53k due at closing. Should I shop around and look for a better rate? What should I do? Thanks

[Paul Defngin]

Quote from @Matt Smith:

I just purchased a property in Tampa today. Got it for 239k cash only deal. It can be used as a rental or an easy flip. Its a 3/2 1260sqft block home. ARV is 360k with estimated repairs being only cosmetic at 10k. Rental comps are between 1800-2200. Bounced it off a few investor friends and all said it was a great deal. The part I need help with is the financing. I'll be using my HELOC for the down payment and rehab budget. The HELOC is at 3% right now until June 1, then it jumps to prime rate. I'm using hard money to carry the remaining balance of the loan. The interest rate on the hard money is 11%. I'm not crazy about that rate. That puts me at roughly $1900/month payments on the hard money and 53k due at closing. Should I shop around and look for a better rate? What should I do? Thanks

I'm confused. You paid $239k cash on it but then you need HELOC for the down payment? Did you mean to say you paid cash of $239K, and now are using your HELOC and hard money to do the rehab?

Usually when I hear someone say that they paid cash for a property, I automatically think that the property was purchased with no liens against the property, meaning you paid CASH for the property, but maybe I am just confused.  

That said, if you did pay cash for the property and reading from what you wrote; you only need about $10k for cosmetic repairs, which seems pretty, pretty, good, if that is realistic, then I would say, ask someone in your network or SOI for the $10k that might be able to get a better rate on their money but less than 11%.  Although, I would say that 11% for hard money that you noted seems pretty good, but that's just my opinion. 

In any case, congratulations on the property and best of luck. 

[Matt Smith]

Quote from @Paul Defngin:

Quote from @Matt Smith:

I just purchased a property in Tampa today. Got it for 239k cash only deal. It can be used as a rental or an easy flip. Its a 3/2 1260sqft block home. ARV is 360k with estimated repairs being only cosmetic at 10k. Rental comps are between 1800-2200. Bounced it off a few investor friends and all said it was a great deal. The part I need help with is the financing. I'll be using my HELOC for the down payment and rehab budget. The HELOC is at 3% right now until June 1, then it jumps to prime rate. I'm using hard money to carry the remaining balance of the loan. The interest rate on the hard money is 11%. I'm not crazy about that rate. That puts me at roughly $1900/month payments on the hard money and 53k due at closing. Should I shop around and look for a better rate? What should I do? Thanks

I'm confused. You paid $239k cash on it but then you need HELOC for the down payment? Did you mean to say you paid cash of $239K, and now are using your HELOC and hard money to do the rehab?

Usually when I hear someone say that they paid cash for a property, I automatically think that the property was purchased with no liens against the property, meaning you paid CASH for the property, but maybe I am just confused.  

That said, if you did pay cash for the property and reading from what you wrote; you only need about $10k for cosmetic repairs, which seems pretty, pretty, good, if that is realistic, then I would say, ask someone in your network or SOI for the $10k that might be able to get a better rate on their money but less than 11%.  Although, I would say that 11% for hard money that you noted seems pretty good, but that's just my opinion. 

In any case, congratulations on the property and best of luck. 

The seller wanted a cash deal which would eliminate a conventional or DSCR loan. My HELOC is for 150k. I used it to cover the closing costs and repairs. Sorry I didnt make that clear originally. The hard money will be used for the purchase.

[Quinton Oake]

Feel free to reach out on this. I would like an opportunity to see what I can do.

[Jay Hurst]

Quote from @Matt Smith:

I just purchased a property in Tampa today. Got it for 239k cash only deal. It can be used as a rental or an easy flip. Its a 3/2 1260sqft block home. ARV is 360k with estimated repairs being only cosmetic at 10k. Rental comps are between 1800-2200. Bounced it off a few investor friends and all said it was a great deal. The part I need help with is the financing. I'll be using my HELOC for the down payment and rehab budget. The HELOC is at 3% right now until June 1, then it jumps to prime rate. I'm using hard money to carry the remaining balance of the loan. The interest rate on the hard money is 11%. I'm not crazy about that rate. That puts me at roughly $1900/month payments on the hard money and 53k due at closing. Should I shop around and look for a better rate? What should I do? Thanks

 @Matt Smith   To be clear, you have financing on this property. The hard money loan is just that a loan. It does matter from a refinancing point of view. But, the first thing you need to decide is do you want to keep as a rental or flip it. If you decide to flip, finish the work and get it on the market to sell without refinancing. The closing costs would not make a refi worth it. 

If you decide to keep it as a long term hold, again finish the work, then yes refi into permanent financing.

[Dave Skow]

@Matt Smith- thanks   ...have you tried to  obtain  conventional financing for the  tampa rental ?   15% down is required - I am  sure the  rate and fees  are much lower than the hard money outlined