Trying to figure out how to finance this deal

Colorado Springs, Colorado
Private Lending & Conventional Mortgage Advice
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Trying to figure out how to finance this deal

Joshua Lurz
Rental Property Investor · Colorado Springs, CO · Member since 2022 · 2 posts · 1 vote

So, recently when browsing on Zillow I found a triplex property that is up for sale for $135,000. It is a 3/1 2/1 and 1/1

The main house is 3/1 lower and 2/1 upper and the garage was converted into the 1 bedroom 550sqft. 

In this town average rents- found by comparing other rentals in the area by size and condition are $800, $1000, and $1200. That is $3,000 a month and at 135k the debt service including utilities, escrow, vacancy, repairs comes out under $2000 a month. This property does need some repairs, I am estimating around 20k-25k worth of repairs (I am the co-owner of a remodeling company and will be doing all the repairs with my crew- at cost)

I am also looking at the regulations to qualify for HUD/sect 8. To ensure I am able to get steady payments without having to deal with tenants. (If anyone has experience with this in Colorado please reach out as I would like to learn more about what to expect and the process.)

My current dilemma is I recently what I call "slingshotted" from renting a Condo for 1750 a month to owning a 5 bedroom 2900sqft home that I bought under market and renovated after saving some money up and am planning to turn it into a co-living property once I put the finishing touches on it. However I used a VA loan to finance this, so I am stuck for at-least a year before being able to refinance. My purchase price was at 395k with a 15k comp. We used it to install radon mitigation, clean the chimney, covered the inspection fee, sewer scope, a 14 month home maintenance and appliance warranty and got a few things touched up and the rest went to principal.
I decided to do a live in home renovation on this one and it took a little longer than anticipated- about 2.5 months.


However, now I see this killer deal and really feel I should move on it. As if something in the universe is telling me I need to buy this property. I am looking at private lending and DSCR loans but I am not able to make both a down payment (30 percent LTV) and cover the remodeling costs. I just don't have the funds to do it. I am hoping to reach out to the owner and see if he would be interested in owner financing. I just don't know what to do to make this happen. This rental has the potential for killer cashflow at a super low price. 2 bedroom 800sqft homes on the same street are selling for 30-40k more than this. Aside from any major foundation issues, asbestos, or meth fire im not really sure what the downside here would be. Any advice fellow investors?

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
3y
Quote from @Joshua Lurz:

So, recently when browsing on Zillow I found a triplex property that is up for sale for $135,000. It is a 3/1 2/1 and 1/1

The main house is 3/1 lower and 2/1 upper and the garage was converted into the 1 bedroom 550sqft. 

In this town average rents- found by comparing other rentals in the area by size and condition are $800, $1000, and $1200. That is $3,000 a month and at 135k the debt service including utilities, escrow, vacancy, repairs comes out under $2000 a month. This property does need some repairs, I am estimating around 20k-25k worth of repairs (I am the co-owner of a remodeling company and will be doing all the repairs with my crew- at cost)

I am also looking at the regulations to qualify for HUD/sect 8. To ensure I am able to get steady payments without having to deal with tenants. (If anyone has experience with this in Colorado please reach out as I would like to learn more about what to expect and the process.)

My current dilemma is I recently what I call "slingshotted" from renting a Condo for 1750 a month to owning a 5 bedroom 2900sqft home that I bought under market and renovated after saving some money up and am planning to turn it into a co-living property once I put the finishing touches on it. However I used a VA loan to finance this, so I am stuck for at-least a year before being able to refinance. My purchase price was at 395k with a 15k comp. We used it to install radon mitigation, clean the chimney, covered the inspection fee, sewer scope, a 14 month home maintenance and appliance warranty and got a few things touched up and the rest went to principal.
I decided to do a live in home renovation on this one and it took a little longer than anticipated- about 2.5 months.


However, now I see this killer deal and really feel I should move on it. As if something in the universe is telling me I need to buy this property. I am looking at private lending and DSCR loans but I am not able to make both a down payment (30 percent LTV) and cover the remodeling costs. I just don't have the funds to do it. I am hoping to reach out to the owner and see if he would be interested in owner financing. I just don't know what to do to make this happen. This rental has the potential for killer cashflow at a super low price. 2 bedroom 800sqft homes on the same street are selling for 30-40k more than this. Aside from any major foundation issues, asbestos, or meth fire im not really sure what the downside here would be. Any advice fellow investors?


Its not going to be eligible for a DSCR loan with that much in renovation costs needed, DSCR Loans are strictly for turnkey properties

For your situation, it sounds like the best path is to find a private money / hard money lender for the purchase/rehab costs and then once rehabbed and rented, refinance (BRRRR) into a DSCR or conventional 30-yr long term loan

I'd recommend checking out this page of featured lenders on BP here, they have lenders for each part (hard money, DSCR, conventional, etc)

https://www.biggerpockets.com/...

[email protected]
Harpoon Capital514 Reviews
WebsiteView Page
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  • Jason WrayPro Member
    Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
    3y

    Joshua,

    You have a few options but its tough without a conversation if you want send me an email I wanted ask a few questions.

    [email protected]727-637-4289
    0Reply
  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    3y

    I would have to know a lot more and I am not sure how much cash you have to inject, but you can do a series of two loans here (just a possibility). The first might be a bridge loan where you finance anywhere from 75% - 90% of the purchase price (depending upon experience) and anywhere from 75% - 100% of the renovation costs. The rates will be around 12% with points, but you'll make interest only payments on the amount drawn. The loan would be for 12-18 months while you renovate. Once you are fully-renovated, provided 6 months have passed since you purchase the property, you can then usually use the newly appraised value to refinance what you have into it into a longer-term DSCR type loan. Of course, there are other financing options, but that might be one route. Let me know if you have more detailed questions, but good luck to you. It sounds like an interesting project.

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Joshua Lurz:

    So, recently when browsing on Zillow I found a triplex property that is up for sale for $135,000. It is a 3/1 2/1 and 1/1

    The main house is 3/1 lower and 2/1 upper and the garage was converted into the 1 bedroom 550sqft. 

    In this town average rents- found by comparing other rentals in the area by size and condition are $800, $1000, and $1200. That is $3,000 a month and at 135k the debt service including utilities, escrow, vacancy, repairs comes out under $2000 a month. This property does need some repairs, I am estimating around 20k-25k worth of repairs (I am the co-owner of a remodeling company and will be doing all the repairs with my crew- at cost)

    I am also looking at the regulations to qualify for HUD/sect 8. To ensure I am able to get steady payments without having to deal with tenants. (If anyone has experience with this in Colorado please reach out as I would like to learn more about what to expect and the process.)

    My current dilemma is I recently what I call "slingshotted" from renting a Condo for 1750 a month to owning a 5 bedroom 2900sqft home that I bought under market and renovated after saving some money up and am planning to turn it into a co-living property once I put the finishing touches on it. However I used a VA loan to finance this, so I am stuck for at-least a year before being able to refinance. My purchase price was at 395k with a 15k comp. We used it to install radon mitigation, clean the chimney, covered the inspection fee, sewer scope, a 14 month home maintenance and appliance warranty and got a few things touched up and the rest went to principal.
    I decided to do a live in home renovation on this one and it took a little longer than anticipated- about 2.5 months.


    However, now I see this killer deal and really feel I should move on it. As if something in the universe is telling me I need to buy this property. I am looking at private lending and DSCR loans but I am not able to make both a down payment (30 percent LTV) and cover the remodeling costs. I just don't have the funds to do it. I am hoping to reach out to the owner and see if he would be interested in owner financing. I just don't know what to do to make this happen. This rental has the potential for killer cashflow at a super low price. 2 bedroom 800sqft homes on the same street are selling for 30-40k more than this. Aside from any major foundation issues, asbestos, or meth fire im not really sure what the downside here would be. Any advice fellow investors?


    Its not going to be eligible for a DSCR loan with that much in renovation costs needed, DSCR Loans are strictly for turnkey properties

    For your situation, it sounds like the best path is to find a private money / hard money lender for the purchase/rehab costs and then once rehabbed and rented, refinance (BRRRR) into a DSCR or conventional 30-yr long term loan

    I'd recommend checking out this page of featured lenders on BP here, they have lenders for each part (hard money, DSCR, conventional, etc)

    https://www.biggerpockets.com/...

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    5Reply
  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Joshua Lurz:

    So, recently when browsing on Zillow I found a triplex property that is up for sale for $135,000. It is a 3/1 2/1 and 1/1

    The main house is 3/1 lower and 2/1 upper and the garage was converted into the 1 bedroom 550sqft. 

    In this town average rents- found by comparing other rentals in the area by size and condition are $800, $1000, and $1200. That is $3,000 a month and at 135k the debt service including utilities, escrow, vacancy, repairs comes out under $2000 a month. This property does need some repairs, I am estimating around 20k-25k worth of repairs (I am the co-owner of a remodeling company and will be doing all the repairs with my crew- at cost)

    I am also looking at the regulations to qualify for HUD/sect 8. To ensure I am able to get steady payments without having to deal with tenants. (If anyone has experience with this in Colorado please reach out as I would like to learn more about what to expect and the process.)

    My current dilemma is I recently what I call "slingshotted" from renting a Condo for 1750 a month to owning a 5 bedroom 2900sqft home that I bought under market and renovated after saving some money up and am planning to turn it into a co-living property once I put the finishing touches on it. However I used a VA loan to finance this, so I am stuck for at-least a year before being able to refinance. My purchase price was at 395k with a 15k comp. We used it to install radon mitigation, clean the chimney, covered the inspection fee, sewer scope, a 14 month home maintenance and appliance warranty and got a few things touched up and the rest went to principal.
    I decided to do a live in home renovation on this one and it took a little longer than anticipated- about 2.5 months.


    However, now I see this killer deal and really feel I should move on it. As if something in the universe is telling me I need to buy this property. I am looking at private lending and DSCR loans but I am not able to make both a down payment (30 percent LTV) and cover the remodeling costs. I just don't have the funds to do it. I am hoping to reach out to the owner and see if he would be interested in owner financing. I just don't know what to do to make this happen. This rental has the potential for killer cashflow at a super low price. 2 bedroom 800sqft homes on the same street are selling for 30-40k more than this. Aside from any major foundation issues, asbestos, or meth fire im not really sure what the downside here would be. Any advice fellow investors?


     What do you expect the market value to be after the rehab?  

    Hurst Real Estate, INC4.991 Reviews
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    0Reply
  • Tanner PileBusiness Member
    Real Estate Broker · Colorado Springs, CO · Member since 2019 · 389 posts · 326 votes
    3y

    @Joshua Lurz Seems like it will be quite the rehab. Have you done a rehab similar to this?

    Tanner Pile4.931 Reviews
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    1Reply
  • Jordan Malara
    Real Estate Agent · Colorado Springs, CO · Member since 2019 · 124 posts · 127 votes
    3y

    @Joshua Lurz I would say it depends on how much cash you have available to you. If you have enough capital to do the renovations, then try to find a partner to bring the down payment for a DSCR loan.


    Seller financing would be a great option if the seller is open to it. You could propose a short term seller financing note where there could be balloon payment to ensure the seller gets his money back sooner if he doesn't want to provide long term seller financing.

    1Reply
  • Ty CouttsBusiness Member
    Lender · Denver, CO · Member since 2022 · 467 posts · 230 votes
    3y

    Hello @Joshua Lurz!

    I was born and raised in Colorado Springs! Very interested in where this property is as it sounds like an amazing deal for you! 

    First off, there are many, many of investors I work with that can do DSCR's for much less than 30% down. Usually 20% but I even have one or two that can go down to 15%. Also we could look at potentially doing more of a fix&flip project that can wrap construction fees into the loan. Higher upfront rates, but no seasoning period on the cashout refi side once you finish the work and get some leases in place.

    Would love to help you find the creative path to help you make this dream a reality! I'll message you right now so we can get into the details a bit!

    [email protected]719-641-5169
    Ty Coutts - Aslan Home Lending 544 Reviews
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    0Reply
  • Dennis Muno
    Lender · Denton, TX · Member since 2023 · 349 posts · 80 votes
    3y

    Hello Joshua,

    I will recommend you call up a local mortgage broker. They will be able to call numerous banks to shop financing offers based on the financial info you provide(your FICO, loan amount sought, max downpayment amount, etc) and get you a couple of lenders who will lend to you and loan pricing.

    I will recommend you proceed from there

    0Reply
  • Jamie Parker
    Real Estate Investor · Memphis, TN · Member since 2016 · 417 posts · 139 votes
    3y
    Quote from @Joshua Lurz:

    So, recently when browsing on Zillow I found a triplex property that is up for sale for $135,000. It is a 3/1 2/1 and 1/1

    The main house is 3/1 lower and 2/1 upper and the garage was converted into the 1 bedroom 550sqft. 

    In this town average rents- found by comparing other rentals in the area by size and condition are $800, $1000, and $1200. That is $3,000 a month and at 135k the debt service including utilities, escrow, vacancy, repairs comes out under $2000 a month. This property does need some repairs, I am estimating around 20k-25k worth of repairs (I am the co-owner of a remodeling company and will be doing all the repairs with my crew- at cost)

    I am also looking at the regulations to qualify for HUD/sect 8. To ensure I am able to get steady payments without having to deal with tenants. (If anyone has experience with this in Colorado please reach out as I would like to learn more about what to expect and the process.)

    My current dilemma is I recently what I call "slingshotted" from renting a Condo for 1750 a month to owning a 5 bedroom 2900sqft home that I bought under market and renovated after saving some money up and am planning to turn it into a co-living property once I put the finishing touches on it. However I used a VA loan to finance this, so I am stuck for at-least a year before being able to refinance. My purchase price was at 395k with a 15k comp. We used it to install radon mitigation, clean the chimney, covered the inspection fee, sewer scope, a 14 month home maintenance and appliance warranty and got a few things touched up and the rest went to principal.
    I decided to do a live in home renovation on this one and it took a little longer than anticipated- about 2.5 months.


    However, now I see this killer deal and really feel I should move on it. As if something in the universe is telling me I need to buy this property. I am looking at private lending and DSCR loans but I am not able to make both a down payment (30 percent LTV) and cover the remodeling costs. I just don't have the funds to do it. I am hoping to reach out to the owner and see if he would be interested in owner financing. I just don't know what to do to make this happen. This rental has the potential for killer cashflow at a super low price. 2 bedroom 800sqft homes on the same street are selling for 30-40k more than this. Aside from any major foundation issues, asbestos, or meth fire im not really sure what the downside here would be. Any advice fellow investors?

    I have a few question about the market. I also would like to understand what options would be right for you. Pm me I would like to show see if there is any way i can help. 
    0Reply
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