5 mortgage free properties left in inheritance

[Ali Gencarelli]

Hi, I need some help. I have 5 properties left to me after my father passed away. However, 3 need major repairs, new kitchens bathrooms, insulation, plumbing you name it it probably needs work. I was raised in a cash house hold and we very rarely ever used credit so I have no credit because I was raised with the if you can't afford it you don't need it mentality. That being said I also have no debt. I know if I want these properties to succeed I need to change my feelings on debt but because I have no credit I'm having a hard time financing. How can I finance what looks like potentially 100k worth of work on these properties? I would prefer not to have to sale. 

I've thought about getting a credit card or a small loan to build my credit but I also have 1 property that most of the major work is done. It just needs some rather expensive finishing touches and I am out of cash. 

Thank you for your time!

[Jon Robinson]

Hi Ali,

There are some "private lenders" out there that will lend to you to fix up the properties, especially if you plan to hold them. I say "private lenders" because while they require less documentation than institutional lenders. With that being said I would focus on the property that you have almost completed, If it is in rentable condition and just some minor touches that need to be done, start advertising it and secure a lease. Once you do that you can qualify for a DSCR loan and pull some of your equity out. Give yourself about 30 days to complete the financing in place and the work done. When you say expensive finishing touches, what do you mean by that? Can they be financed? or possibly bartered for? Do you realistically need these items in order to get it on the market? It sounds like you are off to a pretty good start, I would focus on getting some income from it at this point and pulling equity to start on the next one. You can always come back and add those fancy touches in-between occupancies. I am sure those properties didn't fall apart all in one year, I wouldn't try and fix it all in one year either. You'll do great as long as you keep focus of your plan.

[Robin Simon]

Quote from @Ali Gencarelli:

Hi, I need some help. I have 5 properties left to me after my father passed away. However, 3 need major repairs, new kitchens bathrooms, insulation, plumbing you name it it probably needs work. I was raised in a cash house hold and we very rarely ever used credit so I have no credit because I was raised with the if you can't afford it you don't need it mentality. That being said I also have no debt. I know if I want these properties to succeed I need to change my feelings on debt but because I have no credit I'm having a hard time financing. How can I finance what looks like potentially 100k worth of work on these properties? I would prefer not to have to sale. 

I've thought about getting a credit card or a small loan to build my credit but I also have 1 property that most of the major work is done. It just needs some rather expensive finishing touches and I am out of cash. 

Thank you for your time!

 If you are going to stay pretty conservative (i.e. loan amount no more than 50% of the property value), you should be able to use some hard money loans to finance the rehabs on these

[David Dunkelberg]

What is your end goal once the work is complete?

[Ali Gencarelli]

Quote from @David Dunkelberg:

What is your end goal once the work is complete?

I going to rent them. They were all rentals before my dad passed away but he let them all fall into severe disrepair. I've managed to take care of a few of the big repairs on all of them. They all have new roofs for example. 

[Caroline Gerardo]

How close are you in proximity to the properties? How handy are you at repairs? Have you secured the doors and added cameras or put a guard dog on duty? 

Get one done and looking cute and leased in 35 days. Then get lender who can work on your credit, help you look good on paper. Finance the one that is ready to go and hire help to do the work you don't know how to do yourself. Lists, organize, shop for parts, get handyman partner/insurance agent/lender/your team of helpers

[Stephanie P.]

Quote from @Ali Gencarelli:

Hi, I need some help. I have 5 properties left to me after my father passed away. However, 3 need major repairs, new kitchens bathrooms, insulation, plumbing you name it it probably needs work. I was raised in a cash house hold and we very rarely ever used credit so I have no credit because I was raised with the if you can't afford it you don't need it mentality. That being said I also have no debt. I know if I want these properties to succeed I need to change my feelings on debt but because I have no credit I'm having a hard time financing. How can I finance what looks like potentially 100k worth of work on these properties? I would prefer not to have to sale. 

I've thought about getting a credit card or a small loan to build my credit but I also have 1 property that most of the major work is done. It just needs some rather expensive finishing touches and I am out of cash. 

Thank you for your time!

 Sorry to hear about your Dad, but he left you in a great position.

Start by building credit.  Go to Home Depot and apply for a credit card.  Then go to Kohl's and apply and Target.  That will start your credit history.  Buy something at each place and then pay for it.  Get some tools at Home Depot, a pair of socks at Kohl's and then groceries at Target if they have groceries.  

Get a hard money loan on the house that's close and get it completed. Keep the improvements to less than 50% of the value and make sure the rents cover the hard money payment by double. Within a couple of months, you'll have a credit score. After 12 months, you'll be able to refinance using a DSCR loan because you will have enough trade lines. Refinance out of the hard money loan.

Get another hard money loan on the next house and so on...  Do this until the properties are renovated and making money.

You'll need a team of competent contractors to get this to work, but it works.  People do it all the time.

All the best

Stephanie

[Erik Estrada]

Quote from @Ali Gencarelli:

Hi, I need some help. I have 5 properties left to me after my father passed away. However, 3 need major repairs, new kitchens bathrooms, insulation, plumbing you name it it probably needs work. I was raised in a cash house hold and we very rarely ever used credit so I have no credit because I was raised with the if you can't afford it you don't need it mentality. That being said I also have no debt. I know if I want these properties to succeed I need to change my feelings on debt but because I have no credit I'm having a hard time financing. How can I finance what looks like potentially 100k worth of work on these properties? I would prefer not to have to sale. 

I've thought about getting a credit card or a small loan to build my credit but I also have 1 property that most of the major work is done. It just needs some rather expensive finishing touches and I am out of cash. 

Thank you for your time!

A hard money lender won't have an issue financing this property. You can expect 65% LTV, and can cross collateralize your other properties for higher leverage. Interest rate will be high.

I would recommend this if you need the money as soon as possible. If not, work on building your credit history. This will take a couple years to do. 

[Mohammed Rahman]

Hey @Ali Gencarelli - my condolences on your father's passing. 

You're in a predicament most people are in after inheriting properties. I would ask you to figure out what your goals are with the properties. 

If you want to be a landlord then it makes sense to explore private and hard money options to fix up the properties, get them rented, and then refinance into something long term and lower rate than hard money options. 

If you want to just cash out, then you can easily find buyers for the distressed properties. The buyers are investors, so they'll look to make money for taking on the risk of buying the property - but hey, you get the cash you want and have no headaches for running the properties. 

[V.G Jason]

If you want to stay debt free, which is a great idea. I would recommend against your one issue-- and that is sell. Sell 1 of them, use those proceeds to re-do the other 4.

Having no debt, and making straight cash is one of the best feelings in the world. Don't get caught up in the leverage, then leverage again, and do it some more world we're caught up in. Just cause some, and maybe here most, are doing it. Doesn't mean you need to.

[Carlos Ptriawan]

Quote from @V.G Jason:

If you want to stay debt free, which is a great idea. I would recommend against your one issue-- and that is sell. Sell 1 of them, use those proceeds to re-do the other 4.

Having no debt, and making straight cash is one of the best feelings in the world. Don't get caught up in the leverage, then leverage again, and do it some more world we're caught up in. Just cause some, and maybe here most, are doing it. Doesn't mean you need to.

 300% agree on this.

Don't go to DSCR loan if you can. Just sell one or two and you're all set.

You raised correctly that you have no-debts mentality LOL

[David Dunkelberg]

Quote from @Ali Gencarelli:

Quote from @David Dunkelberg:

What is your end goal once the work is complete?

I going to rent them. They were all rentals before my dad passed away but he let them all fall into severe disrepair. I've managed to take care of a few of the big repairs on all of them. They all have new roofs for example. 

 I agree with the others' advice - if you want to stay out of debt sell one and use those funds to fix up the others. Open up a Home Depot credit card to start building your credit (or Target, etc.)

If you are set against not selling any, look for a hard money loan.

You said 3 of the properties need major repairs - are the other two ready to rent? If so, get those filled and start using that income to fix the other properties!