Financing or cash? Redford, MI (Dearborn area, etc)

7 Replies

Hi all,

I am an out-of-state investor who previously lived in the area, and have owned a rental property in Dearborn, MI, for several years. I am now interested in expanding my holdings into Redford, MI or the surrounding area.

My question today is regarding whether most properties in the area are being purchased in cash, or if there are banks (lenders) in the area that are willing to lend on properties valued at about $60k. Considering a scenario of putting down 25% on such a property, you're looking at financing only about $45k - less than most banks are willing to work with in my experience. Considering that the majority of properties in this area are valued <<$100k, and out-of-state investing is not uncommon in the area, I'm curious whether lenders in the area are more willing to work with these low value loans on investment properties. I've also considered a cash purchase, and then move to do a cash-out refi once a tenant is in place, but I'd rather not tie up such a significant chunk of capital for the duration if its not necessary.

Any experience or suggestions from those familiar with the area would be greatly appreciated.

Thanks!

-Tom

For homes around 50K or less a lot of people are paying with cash, above 50K a lot of people use loans. As for a loan I know personally that CitiMortgage would give you a loan in that amount. @Thomas Smith

Thanks @Jeff Trevarthen and @Richard Ball .  I was expecting I may need to use a delayed financing approach as you mentioned, based on several of the BP podcasts.  I'll check into CitiMortgage, I'd definitely prefer to not have to hold up such a significant chunk of cash for 6+ months before being able to refi.

Thanks!

@Thomas Smith Actually you don't need to wait six months.  You can start immediately after purchase.  Here's an article I wrote about a year ago regarding this very strategy.

https://www.biggerpockets.com/renewsblog/2015/01/08/delayed-financing-buy-investment-property/

If your property is in Michigan, there's a group that I used to broker to called United Wholesale Mortgage.  They are really good, and can do delayed financing, but I'm not sure if they do Retail.  I'm sure you could call them.

Hope that helps,

Jeff

Just keep in mind that delayed financing will only give you a percentage of the purchase price and maybe some of the rehab money...it is not based on the ARV like a loan taken out after the seasoning period (for example 6 months) would be. That doesn't work well for properties that are well below the ARV (such as in Michigan where we are buying properties for $30K that are worth $70-80K and $110K+ at ARV).

@Thomas Smith

Congrats on finding the hotspot of SE MI - I've helped a ton of investors this year acquire rental properties in Redford. Are you looking in 48239 or 48240 zip code? Email me anytime with questions on the market or regarding purchasing. 

Best of luck!