I have a quick question about my first deal. It is a deal that literally fell in my lap. But long story short, I am a signature away from it being under contract. House is in GA, although I live in AL. A previously married couple still have this house in their name and simply put, they need it sold. It’s only 10 years old, just outside Atlanta. Neighborhood has a pond, walking trails, clubhouse, etc. ALL of the homes in this 10-15 year old neighborhood have sold for 280k-325k. I will have this home under contract for 175k, the balance plus 15-20k which is what they are willing to walk away with. It needs NO work done at all. I have wholesaled twice last year. Worst case scenario I will do the same with this one, but I want to use this deal as the first real deal to dive into real estate investing, so maybe to keep this one as a rental. Maybe partner with a hard money company to establish a relationship with them, etc. But since I ran across this site I figured I’d ask you guys? What do you guys think? I’d rather go in the direction that will be as little out of pocket for me. Not because of lack of capital either. Just my preference. Thanks.
@Chris Phillips , I'd flip this property. Take your $100+k and put that towards a MFR that will throw off long-term cash.
This is unlikely to make a good rental. You'll never hit the 1% rule so either it won't cash flow or will have a terrible Return on Equity (ROE), depending on how you structure the debt.
I'd second @Jaysen Medhurst -this could be a quick ~$100K. Put in a small MFR at a 75% LLTV, you could get a property up to $400K with it. That property could cashflow ~$20K a year....much better than that initial $100K upfront check!
Why would you be looking at hard money if it doesn't require any work?
Thanks for the replies. That’s exactly what I was thinking as well to go with the flip, although multifamily units are not that prominent in my area at all so I would aim for another property to flip afterwards. Guess I was think of holding it to get the 1,800 rent that area demands at the very least and thinking I could get funding to keep it and cash flow at least 500 since I wouldn’t anticipate even a higher interest loan on 175k being more than 1,300 piti. From my studies cash flowing 500 on one property is not too bad? But even concerning the flip I was thinking newbies have to go the hard money route? From my research and speaking with several lenders private lenders and traditional lenders are going to ask for much more upfront and some would not even consider a first timer.
Hard money lenders may ask for just as much upfront as traditional lenders depending on the lenders, but it's not really worth your while to go hard money without a rehab required unless you aren't bankable. You'll just end up having to refi down the road to conventional anyway.