You need to talk to lenders to find out what their terms are. Keeping in mind they can easily change a year from now. Most lenders are only going to lend 75% to maybe 80% of market value OR purchase price whichever is less. So a year from now when you buy where is the 20% going to come from?
In 1 year you are not "refinancing", you are "purchasing" so getting cash out or financing more than 75-80% is highly unlikely.
I am a little unclear what the hard moneylender is suggesting. My guess is he is saying buy in now with his help and refinance in a year. This is a more traditional way to do it. In your case probably a better way to do it. i don't see how you buy it in a year with the current lease option.
@Brennan Crick PS a year goes by really fast, when you have a short term loan.
I have seen this scenario a few times in the past
On a short term loan you can max out at 75% of the ARV. at around 8%
For a long term loan you would land around the 6 to 7% interest rate at 75% of the LTV
points would be around 1.5 to 2
Credit Score would need to be around 650 to get something done at these number
If lower you would have to go HML points and rates would be higher of course 12 month loan with options
Short term Loan ARV would be my suggestion you could get up to 90% of the Costs covered then refi out once the work is done in a year...but make sure to improve your credit in the meantime
This is most complicated BRRR deal I've ever seen.
This was a risky first deal so I would network like a motherf**kr and learn as much as humanly possible. If it were me I'd do anything and everything to improve my credit. That's going to play a big role when you refinance in a year like you mentioned.
@Brennan Crick - I too have to applaud your creativity on this one. I would personally be leary of taking a HML right away and trying to re-fi out of that at years end. At least have your option period used before going that route. If you stumble on getting re-financed this one could really end badly, however with risk comes reward. I think you get the obvious, bust butt on improving credit and reducing your debt. If your still hovering too high once you get closer to the end of your option I would seek out a potential partner... better yet, start that process now!
I would gladly "option" a building to a tenant that needed work, while I would be fair if there was a problem for you at the end of 12 months there are others that might not be so forgiving... its a contract after all, your an adult and you should understand the risks before you put your money and effort into the deal. Then again, I cannot part water and have screwed up many times (I like to say I have a degree from the "School of Hard Knocks"... now my wife @Kristan Avila keeps me in check). What Im eluding to, be sure you have an equitable escape should rates, time, etc. turn against you in the future. Putting a year into your first deal and having the whole thing unravel because of a technicality - that would hurt (Im simply referring to your 12 month option... if it runs out you may have provided the owner some much needed equity, for free!)
Its ballsy and ambitious... I applaud it, respect your tenacity, and wish you the best! Pull this off and you've proven extremely resourceful. I think your asking the right questions... spend some time digesting some Kiyosaki, get creative and remember this is NOT a individual sport, rather a team effort. I missed out on a year of acquisitions because I had blinders on (back to my wife on that story, once she finally "corrected me" were buying again... and having a ball doing it!