Real Estate Professional · Novi, MI · Member since 2012 · 73 posts · 8 votes
I have a duplex that I'm looking to purchase for buy and hold and I'm considering a conventional loan vs private money. Are there any private lenders that finance residential deals in Michigan? I'd be interested in discussing it with you.
Private money and rentals are tough to match. Look ar it from PML's perspective...she can get 7-8% and have all of the risk or buy her own investment property and net 9-14% plus appreciation.
Maybe post answers to these questions so those with cash can evaluate what you have: How much are you putting down, what are you paying, what is expected rent, what is market value, what rate/share are you offering? Best of luck.
Private money and rentals are tough to match. Look ar it from PML's perspective...she can get 7-8% and have all of the risk or buy her own investment property and net 9-14% plus appreciation.
Maybe post answers to these questions so those with cash can evaluate what you have: How much are you putting down, what are you paying, what is expected rent, what is market value, what rate/share are you offering? Best of luck.
I would use a HML to purchase and rehab property. Once complete and a tenant is placed, contact me. We'll give you cash out up to 75% of fair market value after you own the property for 90 days.
We are a asset based lender, which means we evaluate the cash flow of the property, loan to value and fico score. No personal debts counted against you - No tax returns required - bank rates/terms. Minimum loan size $75,000
Duplex property each unit is a 3bed/1.5bath which is rare
Total purchase price would be $100,000 with closing costs
Rehab Costs: $5,000 (property is tenanted an already updated to some extent)
Current Rents: $800/unit
Desired Rent: 900-100/unit (market for area is 900-1050
Tenants currently pay for water, gas, electric and are responsible for yard and snow removal.
I'd like to have an investor partner or lend for 25% and I'd use that funding to obtain a conventional mortgage for the remainder. The investor would have 25% equity and still get paid interest on his loan until I could refinance and cash them out. Ideally 2-3 years.
@Bob Green The property really doesn't need a lot of rehab its in very good condition. It would only need a refresher new paint and carpet and a good cleaning. The property has tenants in place that take decent care of everything. My concern with using a HML is that the points and interest will destroy the cash flow.
Using 100% financing with 80K financed at 5% over 30 years (conservative estimate) and 25K financed at 7% interest only for 3 years. It works out to cash flow $200/month using conservative numbers for property management, repairs, maintenance, and cap ex monthly. With the desired rents mentioned above it will cash flow well over $600 per month. I don't think with hard money it will still be as good right way, but I have analyzed that option. I'll run those numbers and see what I come up with. Good idea
A conventional lender won't fund a loan where you've borrowed the down payment.
Few, if any, hard money lenders will lend in second position. I doubt any would lend the slice from 75% to 100%. Certainly not at 7%.
What you might look for is a partner. Someone to invest the 25% as an equity investor. Problem there is that someone who contributes 100% of the cash (the 25% down payment) expects something very close to 100% of the equity (i.e., ownership.) Not 25% because they're putting in 100% of the cash. You getting the loan for the first 75% puts you are far, far, far less risk than the guy who puts in the last 25%.
A path that might work is to get a hard money loan for $110K. That assumes you have a HML who's 1) willing to lend based on ARV and 2) doesn't have a minimum down payment requirement. And that the ARV of your property is somewhere north of $150K. I'm skeptical about that last part, since you're paying $100K and it needs minimal fixup.
The interest will kill you. Plan on 15% +/- and four+/- points right off the top. So you're likely to be cash flow negative until you can refi into a better loan. That refi is also going to need a higher value if you want to pull it off without putting cash in.
I know a PML and a GC who are teaming up to buy, rehab, and rent multiple properties. They are forming an LLC together, I believe the PML will post purchase and rehab funds & will receive an 8% pref. rate. The GC manages the properties. They 50/50 split any profits left. I do not know the ownership percentage but can't imagine the PML is handing 50% of equity from the start. I would guess 75/25 unless GC is throwing money in this as well; he's definitely adding value by managing and rehabbing at a good rate. Time will tell how this works out for them. My guess is that as long as rents and market are stable/improving they will be happy.