Investor · Rocky Hill, CT · Member since 2013 · 373 posts · 299 votes
So here is a bit of context. This is a quadraplex in a beach community in Connecticut, and it has been vacant for a long time period (read years). Due to this factor I don't think that conventional finance will touch the deal. Knowing this- I made sure to have my realtor @Michael Noto reach out ahead of time to the sellers realtor. After being assured they would want to provide owner financing if there was an attractive offer- they came back 10 days later with a "we love the offer but we are not sure on the owner note". As I usually do value add realty- I do have enough cash to renovate the property. The current offer is a 220,000 with the financing built in (10% down and I cover realtor commision). The property will take 80,000 all in to renovate to my standards. This is a 3 season property with the intention of AirBNB , VRBO, or weekly rentals.
What are you thoughts?
1) Get a private equity backer?
2) Work a hard money deal, with a refinance at the end (and lower my offer).
Lender · Sherman Oaks, CA · Member since 2014 · 68 posts · 80 votes
10y
If you have enough down payment using a Hard Money Lender is a great option. Some programs these days have interest rates down in the 7.99% range.
FYI, I personally have vacation rentals in Fort Lauderdale and Palm Springs. Nobody will bring you more inquiries than VRBO & Homeaway. Airbnb holds on to the rental money until after the client arrives......just what you don't want.
Lender · Sherman Oaks, CA · Member since 2014 · 68 posts · 80 votes
10y
If you have enough down payment using a Hard Money Lender is a great option. Some programs these days have interest rates down in the 7.99% range.
FYI, I personally have vacation rentals in Fort Lauderdale and Palm Springs. Nobody will bring you more inquiries than VRBO & Homeaway. Airbnb holds on to the rental money until after the client arrives......just what you don't want.
Investor · Fort Worth, TX · Member since 2016 · 107 posts · 62 votes
10y
There's not enough information to determine what would make the most sense for.
Your investment with 10% down is $22k + $80k to rehab puts you into it $102k + there's always something unexpected.
Is the rehab necessary before renting, or can the rental income pay for the improvements that would need to be done?
You mentioned paying the agents commission...how much is that?
Closing costs? Will you be into it $120,000 with a loan balance of $198,000?
What is the income potential?
What will the property be worth after the improvements?
How much is the area appreciating a year?
Personally, I would only use HML as a last resort and would prefer to sweeten the deal with the seller if possible...they MAY be easier to work with...and offer more favorable terms.
I'm sure you have all the answers to the questions above...but anyone else can't really give you good advise without knowing more.
Investor · Fort Worth, TX · Member since 2016 · 107 posts · 62 votes
10y
So you have about $60,000+ in equity after the improvements are made...nice.
Potential income $4,000 weekly...best to look at the income on a worse case scenario and for an entire year. High season may get $4000 weekly is that at 100% occupancy? Cause we both know that won't happen. How many weeks/months out of the year are considered high season vs low season? How much will you charge during the low season, will it cover your costs or will you need to budget for it?
I'm not trying to get on your case...these are questions I take all my clients through so that when they do buy they know where they are at...they've done their due diligence and always figure worse case scenario...that way anything better is pure gravy!
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
10y
Income potential for how many weeks at 4k? You are in CT so for beach you are talking I would think 10 weeks. After that you maybe having something else. Or have you already factored high and low season? What would make the seller find it palatable, maybe they would do it short term? i would first see what the hesitation is, If you get it rehabbed and producing you can do something move conventional.
North Stonington, CT · Member since 2013 · 35 posts · 10 votes
10y
@William Collins what were the other terms of the seller financing? If refinance is your primary exit strategy for a hard money deal, why not offer the Estate a shorter loan term? If you go to them as a commercial deal (LLC etc.) so they can give you a loan with a balloon payment in 2-3 years. It gives them a set pay-off date, the certainty of an easy foreclosure since your a commercial deal (if necessary), and you can refinance with the ARV at a bank of your choosing.
If this is the property I think it is, it's technically expired right now so you shouldn't be up against much competition.