If you are in the middle of your flip, or any degree prior to ready for listing status, and you find an awesome deal that can be the next flip, how can you go ahead & purchase while capital is tied up in the first property? Will hard money lenders do short term loans? would I have to go the mortgage route? Also, what if funds are available to purchase, but not enough for the rehab part of the second property? We are new & hopefully about to close on deal one, but a HUD foreclosed home I have been watching for weeks may be available for non-owner occupied offers in the near future.
@Kimberly N. , if you have the 20% down payment needed outside of the cash you are using for the current project, then you could use that to secure a loan. You would also need cash reserves to start repairs on the the new project because you, nor the lender, will want it sitting there until you sell the current project.
So the best method is to have more cash to buy out right, use as 20% down, and start the work on it. This is why many small investors can only do one house at a time. It takes a good amount of actual cash reserves even when working with borrowed money.
@Kimberly N. You Could potentially do a short term cash out loan on the property you are currently flipping and the property that you would like to purchase. Each lender has their own requirements.
@Jackelyn Gonzalez , great point that I was not thinking about. I have actually done this before as well. Some lenders call it a bridge or cash out loan. You can take an interest only loan, usually up to 50%, of the current homes ARV that would be paid back once the 1st home closes.
The only issue with these, is they eat more cash in lenders fees and carrying costs, but definitely worth consideration if the deal is good enough.
Correct, you could use an ARV lender or another private money lender with a high LTV based on the as is value. You would definitely want to take additional costs into account and see if you have enough cash to carry the loan. Some lenders allow a portion of the cash out to be held back as payments for a couple months as to not have to come out of pocket on interest payments.
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