I just put my first deal under contract today after a long period of analysis to paralyses. I will explain the deal and then ask my question:
The property is located in South Bend, Indiana in the 46614 zipcode
Under contract at $55,000
I have two GC's estimates for repairs at between $25,000-$30,000. Mainly cosmetic except for needing a new roof.
After closing cost I would be all in for $84,000.
Using my experience as a realtor I am seeing comps that would put my ARV at $110,000.
Question: I originally was going into the deal with a friend who has decided to back out. I am now left looking for hard money lenders willing to lend a majority of the funds needed to close. I have $6000 in private funds to put towards the deal. My question is should I pursue looking for hard money lenders at almost 100% ( yes I know that is virtually impossible) or should I start looking for private money investors and if so how?
Should I continue moving forward?
Hi Stephen, congrats! The numbers DO seem tight, but if you have connections where you can save some money such as closing costs etc. then it may be worth it. The profit doesn't seem to be too high but if you're not looking for a big profit and just really looking to get your foot wet, then don't let this pass. If you're ARV is $110k, assuming that's being conservative then you can possibly get a lot more if your house comes together real nice within budget. Stick to private money as much as possible as you will save thousands from paying interest. With that said, if this is your first deal it may be really hard to find a private lender as you don't have a portfolio yet. After my first 3 houses I recently just got a private lender and bought my 4th house. I'm stoked for you and think you should make this happen.
Does the GC bid you have include labor and material or labor only?
It may be cheaper to get a bid for labor only and buy the materials yourself. Shop for the best deals and pay for materials on your CC's. That's how I've been doing it.
Feel free to reach out to me anytime. Ofcourse what I mentioned above is just my own opinion and may differ from other more seasoned investors.
I see you have it under contract for $55k and bids for $25-30k. You have your all-in at $84k. Is that including closing costs? If go with a HML then there are upfront points you'll be paying too that should be included in your all-in number. You don't say what the cash flow would be after your expenses but it does look pretty slim.
On a 110k ARV home you really want the all in cost to be about 77k not 84k but still a good house for your first deal.
I'm confused a little on your numbers. If you have it under contract for $55k and rehab costs are either $25 or $30k, your "all in" number seems a bit low. I see you're a broker and I assume you added closing costs. You also need to include holding costs as well.
A little food for thought. If you only get $100 for the property, you're now down to a best case scenario of less than $16k profit. If you use hard money, you have points, possible "junk fees", monthly payments etc. I'm not trying to discourage you, I just attempting to get to look at the numbers a tiny bit closer. Good Luck my friend and let us know what happens!
@Stephen Sokolow this sounds like a good first deal..you should barely scrape through based on the numbers you provided.. the experience must be worth something!
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