Situation

7 Replies


I purchased an old two family in a great neighborhood with large property for its location (NYC). My plan was to rent it out for 3 years and begin to rehab it and make it a single family home. I currently rent both units.

The money I used to purchase this was a hard money loan from a friend at applicable federal rate .28%. The home was purchased at a deep discount since it was a deal within the family. My original idea was to borrow the money from my friend and when I refi to pay him back take out less money and make up the difference with all the money I been saving plus income on the property.

For example if I owe him 250,000 refi 175,000 and make up the addition 75,000 from my personal savings.

The refi part should not be an issues since I purchase the home at about a 50% discount.

My main question is am I better off refi the whole 250,000 and keep my money for the costly rehab project (prob need additional funds via another refi) or refi 175,000 and pay him the difference out of pocket.

Any input would be greatly appreciated.  

T.P. Seriuosly.  Why would you come out of pocket if you can refi  and get it all out plus more?

When it comes time to do renovations I will have to cash out more money and am concerned the LTV will be too high. @Joe Villeneuve

Originally posted by @T P. :

When it comes time to do renovations I will have to cash out more money and am concerned the LTV will be too high. @Joe Villeneuve

 If you can use someone else's money, why would you use your own?  Run the actual numbers by me.

Total Cost including your buy in, fees, and rehab.

Actual ARV based on actual comps

% of ARV your refi lender will loan you

Cost of the loan in term, interest rate.

My purchase price was 190,000. Home was appraised for $400,000.

The rehab will be around 250,000 (did not get real numbers yet, this is ballpark figure)

ARV $600,000.

My total cost would be around $440,000.

Most lenders will do 75% LTV.

Thanks for your input.

So 75% of the 600k would be $450k and cover your costs....+ 10k.  There are a number of problems I see...not the least of which is you are using the words, ""Around", "ball park", "not real numbers yet", "around (again)" and "most lenders".

Any of those words mean you're not ready to analyze the deal yet.  Using that many one time is the kiss of death.

Joe Villeneuve  

I totally agree that not knowing or using those words can be a recipe for disaster. The problem is these are plans I have for 3-5 years from now.  

What is guaranteed to come up is the personal loan will be coming due (April 2016).  So I must take this one step at a time.  Paying that off is the first step. And the question remains with the distant future plans I have, is it best to refi the total balance to pay back the current loan, or refi less and make up the difference with personal Funds.  

I really appreciate this discussion. 

You haven't stated a plan so far...just goals.

Here's what would be needed to answer your base question.  What are the monthly numbers for the following on the original units:

1 - Rent
2 - Tax
3 - Insur
4 - Actual ARV
5 - Actual debt
6 - Amount of payoff of personal debt mentioned
7 - Monthly payments on personal debt right now.

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