Acquiring at 50% ARV in order to obtain HML financing?

2 Replies

I'm just about to receive a nice cash-out from a refinance of a Live-In flip I've been working on for the past 2 years.  I'm looking to start flipping on the side with a general contractor.  I've been non-stop researching how to execute this for about a year now but I am having issues with deal analysis.  

A local HML will fund 90% of purchase and 100% of rehab up to 65% ARV. With estimating basic rehab costs on the lower end, the property would have to be purchased for about 40-45% ARV in order to actually get rehab and unexpected costs 100% financed. Otherwise I could try to acquire the property for 50-55% ARV (more realistic) but this would leave me funding 5-10K out of pocket for rehab as well.

I know there are a lot of variables here, but for anyone who understands where I'm coming from - can you please provide some insight on how to overcome this? Do I just need to find a HML that will do the same number but will lend 100% rehab up to 75% ARV?

@Ryan Biankowski , you only have to watch a show like "Good Bones" to know that there are plenty of properties out there that can be bought for much less than 50% ARV.

Some of them are bought for less than $10k, even though sold comps in the area might be around $225k (yes, that's right)! So, using your HML in those cases, you'd just have to make sure that you could keep your rehab borrowings to around $150k.

Need to pick the right market, is all. Oh, and, know your costs...

Ryan,

What are the exact numbers? Purchase price, rehab estimate, and ARV. I can figure this out for your fairly quickly. You can send through PM.

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