Happy Hump Day!
Looking for advice on how to raise funds for deals less than 75K. I've reached out to several HML and was shot down due to the project being so small. I have a 2/1 under seller finance which I have a 10K balance remaining. Looking to put in 30-35K into rehab. Houses this size are selling for 86-90K and renting for $700+ easy. Looking to use this as a rental or even house hack it while rehabbing, but the FUNDS. Currently don't have access to a PML within my circle, and now my only option is continue to beef up my personal savings, continue wholesaling, and use of credit cards.
What's your take?
Could you take a personal loan out for the $40K? I use Lending Club, and they were great!
There are many lenders on the BP forums and directory. Developing a relationship with a funding source is very important in being successful in the fix and flip strategy long term. I am sure there are several that will work with you.
Best of luck in all your endeavors
Linda D. I agree with you. I'll just keep knocking on doors until one opens!
@Jessica A. Smith $35,000 into a deal selling for $90,000 is tight, once you account for holding costs, financing, taxes, insurance, etc. $30-35k level we're talking over 3 from your closing buying to your closing selling it if everything goes perfectly. Strikes me as dangerous, as a hard-money lender myself I would pass on this deal. My recourse is foreclosure should you not perform, and I wouldn't want this property.
I ran the numbers assuming typical hard-money rates and not much of a down payment, if you had it at $30,000 contract you're only making around $13,000 with 18% ROI. The 18% ROI isn't bad, but at this price point if anything moderately goes wrong you may break even (this is assuming a $30,000 contract). I wouldn't do the deal unless it was around $20-22.5k.
@Lucas Machado So you're saying the rehab budget is to high for a property that will appraise for 90K? If I could rehab for 20K this will look more attractive on a loan application? I'm just trying to get a clearer understanding.
I'm looking for houses in the under 50K range...I have excellent credit but was denied for Lending Club. (I'm assuming because I had just increased the limits on both of my credit cards by significant amounts). I was able to get a personal loan with my credit union for 40K. And a business credit card for 25K. Both were simple 5 minute applications.
HM is costly but if it comes to that you may want to keep shopping around for other HMLs...there are def some that go below 75K. Find small banks/credit unions in your area. I found one that only loans under 70K mortgages.
@Jessica A. Smith Spending $35,000 in repair costs for a property with end value of $90,000 doesn't make much sense unless your buying it at a very low price. The math doesn't add up. I typically spend $35,000 on repairs for properties with end values of 2-3x $90,000. The rehab cost is the rehab cost, though - you can't necessarily change what needs to be done to reach your sale price. Of course, if it's a rental you shouldn't be expending the same amount as if the property is being sold to an end user. I would also note paying $90,000 for $700 rent doesn't sound appealing - I wouldn't expect investors to jump at that. Rent closer to $900-$1,000 should draw more interest, but even there, it isn't slam dunk for the investor.
@Lucas Machado Gotcha. This property was $12K with a remaining balance of $10K no interest. The goal is to hold this as a rental doing the BRRRR method. This is my intro into rehab so of course I'll learn things along the way. If I'm unable to secure a loan for rehab work then I'll simply have to find another way to slam dunk it.
Do you have business credit yet? Register your business and get that EIN number. Open up a business account with a business checking BANK (like NorthOne). Building your biz cred can happen pretty quickly.. As well, once you make that biz "official" (website + EIN number) there are TONS of free money from the government for startups. You have these things (listed prior sentence) and you can apply for and get these grants. Do it while building up your biz credit! Biz credit limits get high quick!
Hope this helps, and good luck