Good evening BP community,
We are under contract on a home in South Tampa and are trying to leap over every hurtle that comes our way. Since this is our first real investment and there are so many things to learn, we’re hoping for advice from the collective here. Let me break down the situation:
Purchase: SFR in South Tampa - Price $483,000; Rehab budget - $70,000; ARV $700,000
Down payment: $300,000; Hard money loan: $183,000 (12 months interest only)
Timeline: 9 month reno/3months on market/sale or cash out refi
The home is a large property with lots of potential and opportunity to blow the budget if we get carried away; however, there is enough room for mistakes before we lose our figurative shirts. We plan to take a hard money loan to close gap, but have no experience in this, so this is a learning experience all by itself.
We're exploring the idea of doing a cash our refi once the reno is done, but need to learn the best way to do so since the property will be bought under an LLC we are opening this week. My research says taking the home as a distribution to our names once we're ready to take ownership is the best path, but we'd love your advice. Our goal is to recapture the capital we invest into the home so we can use it in other places as soon as possible. If we can do the refi, it will allow us to live in the property and use the cash to continue investing. I know we're not the first to buy under and LLC and refi to a personal loan, but we don't want to stumble along the way.
Any advice is greatly appreciated and we look forward to sharing what we learn with you all along the way.
Funda and Dan
So you are only taking out a loan for 25% of the ARV ? (183K)
Most HML would go up to 70% to 75%
Also you can still refi once completed under your LLC but the rates will be slightly higher.
Typically 6% to 7.5% depending on credit.
The main issue here is just researching the pros and cons of keeping a property in an LLC
Hello Daniel Sherman. I have had Rentals in S. Tampa for 30 years and never heard of anyone using borrowed Hard Money to buy a $485K House to Rehab and Flip. Just sounds crazy to me, unless you are a builder and your buying the property for half the Retail Value. When you Buy Real Estate, the Profit is supposed to be Up Front. Not on the backside after you take all the Risk and try to Flip it. Your Time Frame is 12 months and you cannot count on this High in the R.E. Market to continue that long without Trump. Do you know the new Tax Rule for Deducting the Expenses of Rehabbing a house to Flip? I think that Trump changed it to only allow you to Deduct 80% of your Expenses. The Flippers here in S. Tampa have slowed down in the last three years. The Builder I heard recently, said that for more than two years he is not building Spec Homes and is keeping his crews busy building these huge Apartment blocks that are going up all over town. Do you have a Crew? There are no Licensed Contractors available in Tampa with any time to do any work. I went looking in April for a Licensed Contractor Handyman for the 3/1.5 Rental house I sold in May. That was a 12 year rental, down near the AFBase and I made $80,000. I have a half acre on a corner, just off of the major highway, leading into the AFBase at Dale Mabry and Interbay Blvd. and I talked with the Plans Development Department about doing a Joint Venture to build ten Town Homes there. They told me that was the last thing I should get involved with because I would be, "taking on all of the Risk." They said I should just continue to keep it listed and Sell outright. That sounds like what you are doing and doing it with Hard Money that has a short time line? At the Top of the R.E. Market? With an Election coming? The Tax Rule is against you and you are not a Builder?