Found a deal. Now I have to figure it out

Jersey City, New Jersey
Real Estate Deal Analysis & Advice
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Found a deal. Now I have to figure it out

Jake Handler
Real Estate Agent · Morristown, NJ · Member since 2020 · 206 posts · 128 votes

Found an off-market deal in Northern, NJ and trying to make it work.  I've made plenty of calls and ran plenty of numbers but would love to hear others' opinions; mostly in the financing field to see what my best financing options are.

Duplex purchase price $225,000

Rehab: $100,000

ARV: $450,000

My preferable strategy is buy and hold, especially because it's a duplex. However, financing feels a bit more challenging with buy and hold; as there are more moving parts. If I raised private money, I'd have to refi to pay investors back and not sure the numbers work to do that. If I were to use hard money and refi into DSCR, I'm still leaving more money in the deal than I'd prefer.

So I'm also considering fix and flip; as that seems like the "easier" route for the trajectory of my portfolio.  Not my preferred strategy in general but it might be better for this; as I can rinse and repeat.

I'm wondering what my best financing options are.  I understand there are fix and flip (or hold) loans that include the bank financing 100%, which sounds amazing, but my concern is the extra hoops through the process.

Other thoughts are partnering with someone who can get a conventional loan & raising private money for the reno, as well as hard the hard money option.

Seeking insight from other professionals.  Thank you very much.

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  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    3y

    This is a common challenge with new investors- the allure of a quick, big paycheck of a flip is a real draw for sure. 

    When you flip, you don't get any of the tax benefits of real estate, as a matter of fact, you're taxed pretty heavily. 

    Also- as a buy and hold for your first deal "leaving more money in the deal" is perfetly acceptable. It's better than having no deal.

    You have a great BRRRR opportunity here. You'd get in the game, possibly have infinite returns and get all of the tax benefits. That's what I'd suggest rather than selling this off and delaying your investment journey.

    This is a marathon, not a sprint. You should keep every property that you can afford to keep. I can't tell you how many flippers I talk to who have all kinds of regret for selling off properties that they could have BRRRRd before they fully understood the game. 

    Best of luck!

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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    3y

    @Jake Handler

    So, as I understand it.. You can get bank financing, but don't want it because of the "...the extra hoops through the process."  What are the extra hoops that are driving you away?  On the surface, sounds like you just don't want the work..

    Why or how is that financing better than your cashout refi where you feel you are leaving too much behind in the deal?

    Then, if refi leaves too much behind in the deal, then it becomes a fix and flip.  Yet, why would a partner who could get the conventional loan be okay?

    Yet, it sounds like you basically don't have neither the cash nor credit since your last suggestion sounds like to borrow everything.

    Honestly, from the info provided seems like either you can't afford this deal (to keep long term) or you need to be so creative that its going to take finding specific individuals with specific resources/capabilities to make this work.  No great way to advise that on a public board with the information provided.

    Did I miss something?

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