I found a distressed single family home with and ARV of about $355k in south Florida. The owners are asking $319k but based on the Zillow pictures alone it looks like it's going to need almost 40k of rehab. If everything works out I wanted to BRRRR the property for a student rental.
I would like to ask for a lower price so I can be close to the 70% ARV ($248,500) and get all my money back with the refinance. Even then I would have to spend about 70k (30% down payment) to put a down for the hard money lender. Which would be almost all my savings. I'm asking if there is any recommendations for another way I can fund this deal? And I don't know anyone who has enough money to fund the whole deal.
@Dale Graham grabbing at 70% ARV will depend on the market and largely on the current owners need to unload the asset.
Dropping all of your reserves into a deal comes with a large degree of risk. If your ARV was off you can be stuck in a hard money loan. You could also have unexpected expenses come up. I should not say 'could', you most likely will, hopefully it is not more than a 10% variance.
@Bryan Noth I appreciate your insight. Your right! using all of my finances is definitely risky, I just need to figure out how to get more reserves or use OPM.
@Dale Graham you are not along in that endeavor. Building your starting capital can be challenging. I would not underplay the value in cutting spending and reducing cost of living expenses to maximize earning potential. Even side hustles can generate strong income over time. People sign up to move furniture, cut lawns, haul off debris, send photos for rehab projects out of state, etc. An extra 500 bucks a week is not chump change.
Or find an entry strategy that is not such a steep barrier to entry. It is why house hacking is such a strong first step for many, lower down payment and potential to repeat after a year and convert the prior to a rental. Not for everyone, but sure makes the first step less painful.
@Dale Graham I did not address the OPM, which can also work if you have the profit margin in the deal and have a reliable partner. It's a fair point
@Dale Graham, given the impact of Covid and adjustments being made to learning, you should plan on different exit strategies and don't bank on student housing being an immediate ssolution. Not saying it would be impossible, but with distance, or online learning expanding, there may not be a reliable market for student housing.
So you are really asking how to get the seller to take $110,000 less than they want? To do that you really need to find something besides money that motivates them.