So buying form auction normally requires a 24 hour close. So yes cash is the way. Here are some though in no real order.
1, Right of redemption. Each state has its own rules. It is 1 year here. The last home owner can buy the building back from for what you paid at auction. They do NOT have to play you for any improvements you did. This is a small risk in low income areas. But in high income areas people may have family and friends how may help them get the house back.
2. Right of redemption is scary to banks. Construction loan can be harder to get if the building is still inside the redemption time.
3. 6 month seasoning. When you refit, The bank will want the building in your name for 6 month before they will lend on a new appraisal value. Before that time, They will only lend to cost. Your cash will be tied up for 6 months. This may slow down your next deal.
4. HELOC. You can get a HELOC on the auctioned building right after the rehab is done. The local banked I used let us get 80% LTV based off new appraised value. It may help you start your next deal faster while still inside the 6 months seasoning period.
5. Know your max bid before the auction. DON"T bid more than that. Other investors may have different goals than you. Some are ok bidding it up to the point they can't pull all of the cash back out.
@Freddy Hernandez using a HELOC to purchase a property is a good strategy if you have a plan to pay it back quickly (since the rate is variable) and since you have a plan this is good. There are A LOT of misconceptions on refinancing and taking cash out (even to pay back a HELOC). I wrote a pretty lengthy article on it HERE. Feel free to ask more questions if you need. Thanks!
@Wilson Lee That is a lot of great info!! Thank you!
@Andrew Postell Thank you Andrew! I'll make sure to read your article and get back with any questions.
@Freddy Hernandez , can you think of a better use for a HELOC?
(Variations of this are probably the most discussed/recommended here at BP). All the best...
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