First Time Invester- Hard money and Duplexes

4 Replies

This is my first time investing so I am a total newbie. I have been presented an opportunity from a landlord that is older and way behind on his property taxes. He has listed his three duplexes on mls for 170K. Since I'm new to investment, conventional loans have become a problem because local lenders only want to place a mortgage on one property at a time.

Is it best to take out a hard money loan on just one duplex and try to refinance within 12 months or to secure all three with hard money? My strategy is to buy and hold instead of flipping.

@Sedgrid Lewis I'm not super smart in hard money, but I know that with the hard money terms you'd probably receive, you'd need a lot of cash reserves before jumping in. Holding a hard money loan for 1 year could end up being very expensive.

Hopefully someone with more experience can chime in - but this could be an option of the landlord and yourself are patient: buy one property at a time, wait 6 months, and then cash out refinance. Then take that cash to purchase the next property. Then repeat. It would also give you time to ensure each property is stabilized and rented. This would get some cash flow in your pocket to help give you a peace of mind rather than jumping in with three right away and having your feet to the fire.

If the landlord is hesitant of this idea - you could pay him a "stipend" each month for holding the property for you. At the end of the day, this would still be cheaper than doing hard money I would imagine. Just an idea!

@Sedgrid Lewis

It all depends on a few other variables to decide which strategy may be best (and if it is even worth it).  Evaluate each property separately.

I would start with the rent rolls.  Signed leases? When are they up? 

- How much does he owe in taxes? What is he willing to sell for?

- Is seller financing an option? (I would assume no if he is upside down in taxes but who knows)

- How is your "mortgage worthiness"? Meaning, would you qualify for a conventional loan when it comes time to refinance?

The last bullet will be very important to a Hard Money Lender, they will want to see a solid exit strategy.  Also, if the property is fully rented, there are some hard money lenders that offer rental products that are for this exact situation.  I would call around and run the scenario past some hard money lenders and see what they offer.

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