$25K Personal Loan to Finance & Rehab 2 SFH Properties

[Dillon M. Leonard]

Hi! Im a new wanna-be investor and have been researching financing options and properties for about 6 months now. Ive read several books on general finance and investing in real estate and Im looking to finally pull the trigger! 

I have found 2 SFH on the same block, owned by 1 owner in Downtown Louisville, KY. Problem being they are too cheap for traditional mortgages and I need capitol for rehab rolled into the loan. The purchase price of the 2 properties together is $14,000 and are in need of about $10,000 in repairs & rehab between the two. Between the two properties I stand to take in $1450 (pre tax, insurance, app. exp.) per month.

I have about $9000 in liquid assets available to invest, however I am kicking around the idea of taking out a unsecured personal or business loan for $25,000/$30,000 for property acquisition and rehab at 7.99% for a 5 year term. 

Has anyone done this to acquire properties or have any better recommendations? Thanks in advance!

[Michael Seeker]

Originally posted by @Dillon M. Leonard:

Hi! Im a new wanna-be investor and have been researching financing options and properties for about 6 months now. Ive read several books on general finance and investing in real estate and Im looking to finally pull the trigger! 

I have found 2 SFH on the same block, owned by 1 owner in Downtown Louisville, KY. Problem being they are too cheap for traditional mortgages and I need capitol for rehab rolled into the loan. The purchase price of the 2 properties together is $14,000 and are in need of about $10,000 in repairs & rehab between the two. Between the two properties I stand to take in $1450 (pre tax, insurance, app. exp.) per month.

I have about $9000 in liquid assets available to invest, however I am kicking around the idea of taking out a unsecured personal or business loan for $25,000/$30,000 for property acquisition and rehab at 7.99% for a 5 year term. 

Has anyone done this to acquire properties or have any better recommendations? Thanks in advance!

Hey Dillon, I've borrowed money many different ways at a variety of terms throughout my investing career to keep things moving forward.  I've taken out numerous unsecured and secured loans as high as 12% on a 1-year term.  I didn't enjoy paying that much, but it's what I needed to do at the time to get the deals done.  

While 8% for 5 years isn't amazing, it isn't bad for what you're trying to do with it and the fact that it's not tied to the real estate.  It sounds like you're using best case scenario on your rehab and rental income projections, but even if those numbers are off, you should be able to pay the loan off within 5 years.  Be careful investing in low-priced properties as there are a lot more risks involved with crime, bad debt, bad tenants, vacancy, etc.