Real Estate Investor / Syndicator · Austin, TX · Member since 2013 · 210 posts · 135 votes
Hi BPers,
This is my latest rehab. One of biggest and ugliest house that i have purchased. The garage has ceiling damaged by water and everywhere else some kids has vandalize the house. Found the deal through my direct marketing. House has been vacant for past 5 years. That means....all mechanical items need to be replaced.
Smells money inside the house. Awesome deal in terms of numbers . The numbers are below 68% ARV after repairs and closing cost included. This is expected to be a Buy and Hold. I would do double close on this with hard money and later Conventional financing.
1 month rehab estimate but i am not rushing as it would be hard to find good tenants during Winter months anyway. I usually do my own rehabs with subcontractor but in this case i am trying a General contractor with good credibility. Its going to be beautiful after its done. Will post as the project continues.
...The double close is a strategy that you buy a house with hard money lender/Private lender to purchase the house and rehab them. After the rehab is done (few months for rehab), then you refi the loan to conventional hard money lender at prime rate. If you follow this strategy, any deals that is below 66% of ARV would means that you have a zero cash out of pocket. This is an example of zero money down investing by creative financing.
james
Hi James, The strategy you describe isn't called "double close" is it? (That refers to when two sales contracts are signed one after the other through a third party on the same day)?
But does anyone know if there is a usual name for James' strategy? If not, there probably should be?
And is this a flip (as implied), or will it be a 'buy-to-hold'? Either way, great job James...
@Brent Coombs I know its a bit confusing when we talk about double close. One is the wholesalers's double close when two closing happens at the same time period at the title company and the second one is minimizing cash out of pocket by doing purchase+rehab closing follow by refinancing using Conventional loan. The 2nd scenario is what i use the most and it has worked very well for me. Most people does not know the 2nd strategy because many thinks that we need "seasoning" period of 6 -12 months for the refinancing. I do the refinancing within 1-2 months. In that case you will see the power of using hard money for leveraging and achieving minimum cash out of pocket. You do pay high loss in equity because of two closings but its all part of the loan. Not networking/partnership is needed. Its simple bank/hard money transaction.
This is not a flip but a buy and hold. If you do flips, then you just need one closing.
@James Kandasamy Seems to me that you should now have a good enough relationship with your conventional Lender to not even need hard money for 1-2 months? Maybe next time? Congrats on a job well done...
@Brent Coombs I do but the conventional lender are restricted to do the refinance. at 75%. If i skip the hard money lender then it would be a direct purchase, not a refi.