Good Morning Everyone,
I think I've found a deal or two and I'm going to look at some properties tomorrow. My head is already spinning with the details that need to get lined up so I'm wondering if there is anyone local who would be willing to help me get the process straightened out. I've found a rehab project down in Alexandria for 275,000 and two other properties that range from 339,900 to 350,000. The rehab listing is asking for cash or rehab loan only so I was thinking of approaching a hard money lender to get the rehab done. The seller's agent estimated between $30k-$50k for the rehab. Would I then be able to use an FHA loan to do a cash out refinance after the forced appreciation, assuming I move into it of course? I estimate that after a renovation the value will be similar to the $339,900 because they are the same style of house on the same block. The most recent tax appraisal of this property was over $300k, which doesn't seem to take the need for a rehab into account. I've been running the calculators and I'm having some trouble estimating costs. I'm also considering just trying to flip the property. Any suggestions or guidance would be greatly appreciated in this.
@Kyle Lange Happy to help you through the process. I'll PM you.
Hi @Kyle Lange ,
First off, welcome to BP!
I would never trust rehab numbers from the seller or seller's agent. If you can, bring a contractor with you to the house. That's your best way to judge the rehab cost (and get a free inspection).
If you can get a conventional loan (FHA + 203k) to acquire and rehab the property, that's your best bet. There's no cheaper loan than this. However, it's going to take a while to close and your offer isn't going to look as competitive as someone else's. But if there's no competition, then why not? Note that if you use an FHA loan, you have to live in it as your primary. You can't flip it... although I guess you can if it takes you longer than a year to complete the flip.
But your post basically said the seller's looking for a cash (or hard money) offer. I'd go and get pre-approved by a hard money lender. You can make an offer on the property (with an inspection contingency) in the meantime if you're afraid someone else is going to take it.
The numbers you quoted doesn't seem to work as a flip (so you can't use that as an exit strategy), but can work as your primary residence. Try to follow the 70% rule (where acquisition price + rehab <= 70% of ARV); this will ensure you have enough margin on your deals.
If you have trouble figuring out the ARV, ask a local investor-friendly real estate agent.
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