@Cody L. thanks I am worried with my margins being bad that I will just break even or worse. Any experience with buy abs hold timing??
Depends on where you're at. If you're just starting, I'd say jump on a deal even if margins are tight. You will learn so much that whatever cash you make is just the whip-cream on the sundae.
I had no CLUE what I was doing on my first few flips (bought at auction). Hell, one of the first places I bought I coudln't get in (doors locked and you don't get keys at auction). So I crawled though the window. Well wouldn't you know, when I got inside there was a family eating dinner in the dining room. They were looking at me like "wtf are you doing?". I said "Uh, I bought this house. What are you doing here?
So yeah, if that was my start to RE investing, you'll be fine. :)
Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
9y
Not only do you need to figure out what actual rehab costs are, you also need to figure your carry costs, closing costs, realtor fees, etc as well. All that other stuff adds up.
Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
9y
So are you saying the 32k is all on top of the 146k + 23k ?
You'll have to pay taxes, insurance, and utilities every month that you own it too. Are you sure you would actually sell at the full ARV? Are you going to use a realtor to sell it? The buyer will probably have a realtor. If both sides are using a realtor there goes 6% of your sales price. You'll have closing fees when you sell too to add on top of that. So even if you sold for $215k with zero concessions you're probably only going to actually get $200k.
Houston, TX · Member since 2015 · 81 posts · 19 votes
9y
I accounted for 3 months holding costs and my realtor charges me 1% so I accounted for a 4% commission fee. I am just shocked my out of pocket is going to be that much even with hard money. I thought the whole point of this type of financing was to pay high interest for someone else's money and not your own
Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y
Brittany Villamil
Interest is paid monthly, not all at closing.
The rate quoted would be an annual rate. How much you pay depends on how many months you carry the loan.
What you pay at closing would be down payment, closing costs, points.
I accounted for 3 months holding costs and my realtor charges me 1% so I accounted for a 4% commission fee. I am just shocked my out of pocket is going to be that much even with hard money. I thought the whole point of this type of financing was to pay high interest for someone else's money and not your own
Brittany almost every type of lender, whether it be private or bank lending, will want you to have some form of skin in the game. I got a 90% LTC hard-money quote with 100% rehab costs with 2.75 points. APR was around 10%. There are creative ways to be 100% financed though. On my deal I was going to get a personal loan to cover the 10% required to get the hard money. Just be very prudent when you are calculating your numbers and monthly payments required. Good luck.
Specialist · Indianapolis, IN · Member since 2016 · 841 posts · 480 votes
9y
You will likely have to come up with minimum of 10% - just my experience. The thing to be concerned about in my eyes is more about knowing the total of the rehab costs even before you pick up the property. I think this is so important. Most of the people I work with - pass on 90% of their opportunities because they get the full picture on rehab costs before acquisition. It's that other 10% that they bite on and hit good ROIs with. If you get as much info up front - it substantially lowers your risk.
Investor · Menifee, CA · Member since 2015 · 534 posts · 216 votes
9y
Rehab costs are a must to know or be close. Do you have a contractor you have used before and know his numbers?? Are you good at your walk throughs and judging how much rehab will cost? Usually the better the deal the smaller amount on the down with the hard/private money lender. If your lender is asking for more money down then maybe he is viewing a different value on the ARV then you. In California it's about $20 a SQFT for the basic rehab stuff, then we add big or out of the norm stuff on top of that number plus the stuff that you didn't factor in to rehab, stuff that always pops up during the rehab you didn't plan for.
I accounted for 3 months holding costs and my realtor charges me 1% so I accounted for a 4% commission fee. I am just shocked my out of pocket is going to be that much even with hard money. I thought the whole point of this type of financing was to pay high interest for someone else's money and not your own
To account for only 3 months means you need to complete the rehab in 1 month, find a buyer in the first 2 weeks and then the 45 day closing (some are 30 but most seem to take longer). That would put you in a best case scenario, you should be looking at average case with the worst case hopefully meaning you break even.
The whole point of hard money - it is not just about other people's money, they require their downside risks to be covered and they are not going to lend you 100% of thevpurchase and 100% of the rehab. If they did, they would be taking a large equity position, not just simple interest.
Lastly, you had better be absolutely sure of your rehab number, that seems low to me (but certainly possible if it truly is simple cosmetics).
Houston, TX · Member since 2015 · 81 posts · 19 votes
9y
Thank you everyone for the input! The house really is in excellent condition. New AC and furnace. New roof. The biggest repair I'll have to make is a water spot on the roof from when they put in the new ac. Everything is purely cosmetic. The last house we flipped was 2200 and we spent 20.5k on repairs (also just cosmetic) this new house is 2300 sq ft.
In my numbers i accounted for 6 months of holding costs.
Can anyone recommend a hard money lender in the Houston area?
Also, would it not be better for me to take a hard money loan for just the purchase price and then take out a personal loan for the repairs? Trying to get better margins
Houston, TX · Member since 2015 · 81 posts · 19 votes
9y
also is there any thing out there, for instance and ap or spread sheet that would calculate every little hard money number and all other fees? I'd like to organize all of these different rates and numbers...costs...etc on paper
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
9y
If I'm financing 80% of the purchase price, and buyer is doing repairs, I'll typically charge 2 points and 8-10%. Closing time is as little as 1-2 weeks. If it's someone I closed with before I can do real fast. 1st timers are slower since there is a little more DD done. The rate shouldn't be a huge factor as you're not doing a 30 year loan -- you're looking to get in and out fast.
The advantage of hard money (or private money) is you don't have to deal with the silly underwriting and time a conventional lender will do (I use the term "lender" loosely as they don't lend. They put together then loan then sell it off -- thus it has to fit into a cute vanilla box. Thus silly requirements.
Realtor · Houston, TX · Member since 2017 · 177 posts · 68 votes
9y
Hi @Brittany Villamil are you also with any local REIAs? I am on with RENC (Houston REIA) and I've collected contact info as people post offering to lend money. IM me I'd be happy to share with you what I have so far. I'm also a realtor and can look at recent sales in the neighborhood for you.
Houston, TX · Member since 2015 · 81 posts · 19 votes
9y
@Tristan S. right now I do not do any marketing. I've only been sending letters to homes that look like they need attention. I got this house under contract by just walking around my neighborhood block and talking to people!
Real Estate Consultant · Cleveland, OH · Member since 2016 · 511 posts · 345 votes
9y
@Brittany Villamil If you are looking for software, I would reccommend HouseFlippingSpreadsheet. I used it religiously and it does a great job helping you crunch numbers.
@Cody L. thanks I am worried with my margins being bad that I will just break even or worse. Any experience with buy abs hold timing??
Depends on where you're at. If you're just starting, I'd say jump on a deal even if margins are tight. You will learn so much that whatever cash you make is just the whip-cream on the sundae.
I had no CLUE what I was doing on my first few flips (bought at auction). Hell, one of the first places I bought I coudln't get in (doors locked and you don't get keys at auction). So I crawled though the window. Well wouldn't you know, when I got inside there was a family eating dinner in the dining room. They were looking at me like "wtf are you doing?". I said "Uh, I bought this house. What are you doing here?
So yeah, if that was my start to RE investing, you'll be fine. :)
@Cody L. Lol! Ok. That actually makes me feel much better about my situation, thank you!! Do you have any lenders you like to work with?
I like working with anyone (lender or any other type of business partner) that's easy to work with. Simple, informal, no fuss.
Most of my apts are financed by one of two local banks (with one of them getting about 80% of my biz). I do refinances with larger Freddie lenders that are a pain, require a ton of docs, but I can deal with that on a refi where I'm not under the gun to close.
There are 4-5 local Houston banks that are good for apts. Green Bank, Allegiance, Texan Bank. There were a few others I've used in the past but I don't want to suggest them as I haven't done something with them. So even if they are lending, I only recommend who I know from my own experience.