Rental Property Investor · Goldsboro, NC · Member since 2019 · 28 posts · 4 votes
As first time investors, my wife and I have found a deal we want to flip. We have been pre approved for a conventional investment loan of 140k with 25% down and 4%. The property is listed at $112k and an arv around 200k. We are going through the property tomorrow with a contractor to see the extent of the renovation. Once we have a number we were going to finance the rehab through hard money. When it comes to hard money lenders does it work to call a bunch of lenders I find on google and see the best rate or is there another way to find a hard money lender which hopefully turns into a long standing business relationship?
@Andrew Menkes there's a few government backed loans structured like a 203k. They allow you to finance the rehab into the loan and they oversee it making sure it's done legal and right. The downpayment is 15% . All the numbers and contractors are in place before close.
One caveat is you have to own the property a year before you sell.
This type loan would be perfect for duplex, triplex, or Fourplex. You don't begin making payments until the property is move in ready.
@Andrew Menkes if I were you I'd look at as many options as possible. When looking at a hard money lender you obviously will be looking to get the best rate you can, but that's not the only thing to concern yourself with. I'd ask other flippers that you know and get recommendations. For the larger HMLs look online and see what the reviews say.
Pay close attention to the HMLs that change fee structure, ask for a bunch of upfront money, and nickel & dime borrowers. You also want to look for HMLs that can make a decision quickly and don't ask for a mountain of paperwork. In your case, you may not have lots of options as it would seem you'd be asking a HML to take a 2nd position lien. Some HMLs will do that some won't. It's certainly riskier for the lender.
Thank you that is a good point on the 2nd position lien. I might consider financing the whole project through hard money. At first we were considering renting it out but now with the value we can get flipping it we can use the profit to finance the next rental investment.
As first time investors, my wife and I have found a deal we want to flip. We have been pre approved for a conventional investment loan of 140k with 25% down and 4%. The property is listed at $112k and an arv around 200k. We are going through the property tomorrow with a contractor to see the extent of the renovation. Once we have a number we were going to finance the rehab through hard money. When it comes to hard money lenders does it work to call a bunch of lenders I find on google and see the best rate or is there another way to find a hard money lender which hopefully turns into a long standing business relationship?
I would not advise using hard money on your first project. Its very expensive and will eat your profits fast, Also if you make some errors in your assumptions which you will especially if you're going it alone you may end up losing money. You are better off using banks or private lenders.
Thank you. The house is a bank owned foreclosure and the agent I’m working with is calling the bank and seeing if there are offers so we could possibly offer less. She showed me a comp that was a bank owned foreclosure that sold for much less than the current asking price.
I would not search Google for lenders or pretty much an real estate related services. I would leverage my network or I'd come here. There are a number of lenders and people who can recommend lenders right here.
I’ve been talking to mortgage companies today and some of them offer “Reno Loans” that bundle rehab but with the time and Coronavirus they have turned them off.
@Andrew Menkes hard money normally will not just fund the reno side as they and most do require first position lien. Just had that issue on my last flip, off market property we did conventional thinking HML will bridge it. But nope I had to go private money for the reno. Plus reno style conventional requires alot of paper work to be submitted for draws. So make sure what ever contractor ur looking over the property with is and has dealt with these types of funding. Otherwise ur in for a headache and a delayed reno
@Andrew Menkes there's a few government backed loans structured like a 203k. They allow you to finance the rehab into the loan and they oversee it making sure it's done legal and right. The downpayment is 15% . All the numbers and contractors are in place before close.
One caveat is you have to own the property a year before you sell.
This type loan would be perfect for duplex, triplex, or Fourplex. You don't begin making payments until the property is move in ready.