Newbie here in Minneapolis looking to flip my first house, but it is bank-owned and I need to move quickly.
I am young and have not owned any property before. Will $10,000 be enough for a down payment on a $169,000 bank-owned house? Where is my best option for getting pre-approved for a mortgage? Any recommendations for a good real estate agent in the north metro?
I'm hoping to be able to get a mortgage for $210,000 so that I have room for $40-50,000 in renovations.
I'd honestly say you arent ready if you dont have financing lined up, dont know how much to put down, or have any sort of support lined up. The urgency of having to move quick will quickly come undone if you havnt done a TON of research and planning, especially on your first deal.
Why do you think its a deal? Do you have data on the neighborhood? Do you know what has sold in the last 6 months so you arent overpaying for a property? Do you have an idea on ARV (hopefully its $300k based on your $210k all in price)? Comps? Met with contractors or know the rehab costs to within 10% error? Have financing? Know your holding costs? Know the permitting process in your city? Know the Occupancy inspection process in MNPLS?
Lots of moving parts and factors, I'm just trying to make you think about everything before jumping into something where you havnt done your homework. Pulling the trigger on the first deal is nerve wracking. I ran comps 100 times, talked to 4 contractors to get bids, talked to another 3-4 agents for opinions, setup showings on the nearest listings within .5 miles and took detailed notes on each based on the price point, made sure I knew which repair items required city permits, and the processes on that (sure, the contractor usually takes care of that, but I didnt know what did/didnt require permits), talked to my insurance agent to get an idea on insurance costs, lined up 2 sources of funding (in case one fell through) and knew my holding costs to nearly the dollar amount, studied the area and watched the DOM like a hawk, drew up exit plans based on re-market price, time on market, etc... etc etc.
And I do have an agent I know up in MNPLS, twin brother of a good friend of mine, PM me if you want his info!
Hi @Grant Shafranski ,
Welcome to Bigger Pockets. I'm a Broker/Investor in the Minneapolis area.
Anson has provided many good points. I wouldn't get too excited about this deal as you'll have some prep work to do before you'd ever want to/ be able to submit an offer.
After you know what you can afford, then you can get excited about shopping;)
First step will be to meet with a lender or equity partner. 25% down of as-is or appraised value (whichever is lower) is pretty typical for new investors in our market (which of course does not include rehab costs). There was one awesome lending program with a local bank that would would finance up to 80% of after repair value (and disperse rehab funds throughout the renovation), but unfortunately, that program is no longer available.
There are also a few great investment groups to get started with in our area- many lenders attend monthly and could provide with some options.
Assuming you can justify an ARV for this house of $300K, then I think you need to have $45K of your own cash plus whatever percentage your lender requires you to put in. There are HMLs who would lend you 70% of ARV, even if that's 100% of your purchase and rehab. So, if you have a solid $300K ARV, you could potentially borrow $210K (less about $9000 in points and fees.) But you're going to have monthly payments of around $2625. And you will need to pay up front for materials and labor, then be reimbursed for these costs by the HML after the work is inspected. And you'll want some cash to keep alive if the project runs overbudget.
Now, the bare minimum, IMHO, for this deal, assuming $169K purchase and $40K rehab would be about $260K. That has a good shot of being break even, though not making much, if any profit. If you did that, you might borrow $180K, with a net of about $170K after points and fees. That would cover the purchase, but you would be on your own for rehab, interest payments and other costs.
@Grant Shafranski everybody has to start somewhere, you got a great question. I would have to agree with a lot of the advice already given.
I have a lender and a some realtors that you might want checkout, if your interested let me know.
Keep checking out BP if you haven't already and you will find a lot of useful information here.
Best of luck.
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