Indianapolis, IN · Member since 2015 · 3 posts · 0 votes
Hello everyone. Im from Indianapolis, IN and i'm looking into my first investment property but the issue is this. It needs some construction work, probably around 12-15k range. I don't have the credit to get a construction loan but I do know some people with a nice amount of cash. How do I calculate out a loan from them that actually works and what's typical? What have you guys seen done when calculating out private money loans that typically work for both parties? Even if there is another post somewhere that someone can point me out to any help will be greatly appreciated!
If you need the info.
getting the house from family member for $4500 its ARV is 44k . Area rents for around $700.00/mo
Rental Property Investor · Indianapolis, IN · Member since 2016 · 200 posts · 87 votes
10y
I have seen some people do the calculation with no financing the do a second for with financing. If you want to be conservative and have a 4 month timeline you would want to add about 6% of the financed cost as points plus interest on a non hard money private loan.
So for your 44k ARV plus 15k work they could finance about 40k of that and so the financing cost would be about 2400. This is fix and flip though.
On a buy and hold add in about 2% of the financed cost and 1% per month for interest.
So, add $800 to the purchase price. This makes the out of pokes $20.8k instead of about $20k.
Then add in $400 per month for the costs. So, this example you would probably not want to finance with private money as it would leave you with no cashflow and no bank will finance it with the work and the low price until you have it for about 6 months and would need a decent market value to do it.
Indianapolis, IN · Member since 2015 · 3 posts · 0 votes
10y
Thanks Edward those calculations make sense. I'll apply those to my situation and see what happens. I figured no bank would lend on anything that low. Thanks a million. I'll see if there are some work arounds. It would definitely be a buy and hold