Las Vegas, NV · Member since 2020 · 162 posts · 113 votes
Hello friends,
I am looking to purchase my first investment property. Currently, I am living in Las Vegas and looking to purchase out of state. The deciding factor for investing out of state has been reading David Greene's Long-Distance Real Estate Investing. I have boots on the ground in Memphis and know that the market tends to cashflow well.
The property is in Memphis TN located within a C class neighbourhood where the number's work for me and I feel comfortable investing. The property will need about $5000 in repairs. There is a current tenant month to month and paying below market rents which could be $675-$700. Comps in the area run about $55,000-$60,000.
As a new investor, I would love to share for some feed back on what you think about the deal.
Investor · Livingston, TN · Member since 2016 · 155 posts · 112 votes
6y
With a property at that price I would do a Hard money lend and pay cash for the property, get enough from the lender to also do the rehab. Once you have done the rehab hopefully less than 30 days, go to a bank and get it refinanced and pull all the money back out.
Example
Hard money Lend: 52k (Give the lender a great deal flat 2% ($1400) for 45 days) Close with the cash, rehab fast. So total in is 52k + $1400 = $53,400
After rehab appraisal: 65k (estimate)
20% equity kept for the bank: 13k
Cash out 52k, so your out of pocket 1400 bucks.
This is what I do and it works great. If it appraises for 67k, your now in the property with no money down. This method will decrease your cash flow but also decreased out of pocket expense to buy these houses.
Investor · Livingston, TN · Member since 2016 · 155 posts · 112 votes
6y
With a property at that price I would do a Hard money lend and pay cash for the property, get enough from the lender to also do the rehab. Once you have done the rehab hopefully less than 30 days, go to a bank and get it refinanced and pull all the money back out.
Example
Hard money Lend: 52k (Give the lender a great deal flat 2% ($1400) for 45 days) Close with the cash, rehab fast. So total in is 52k + $1400 = $53,400
After rehab appraisal: 65k (estimate)
20% equity kept for the bank: 13k
Cash out 52k, so your out of pocket 1400 bucks.
This is what I do and it works great. If it appraises for 67k, your now in the property with no money down. This method will decrease your cash flow but also decreased out of pocket expense to buy these houses.
With a property at that price I would do a Hard money lend and pay cash for the property, get enough from the lender to also do the rehab. Once you have done the rehab hopefully less than 30 days, go to a bank and get it refinanced and pull all the money back out.
Example
Hard money Lend: 52k (Give the lender a great deal flat 2% ($1400) for 45 days) Close with the cash, rehab fast. So total in is 52k + $1400 = $53,400
After rehab appraisal: 65k (estimate)
20% equity kept for the bank: 13k
Cash out 52k, so your out of pocket 1400 bucks.
This is what I do and it works great. If it appraises for 67k, your now in the property with no money down. This method will decrease your cash flow but also decreased out of pocket expense to buy these houses.
Cody,
What a great idea that is. Essentially if I do this right, I could potentially pull all of my money out of the deal.
I haven't thought to go the Hard Money route. That would be a great way to close quickly and add value to the property through the rehab. I guess my next question would be...
What hard money lenders would be happy with 2% flat fee?
Investor · Livingston, TN · Member since 2016 · 155 posts · 112 votes
6y
2% flat rat for 30 days is actually 24% annually (crazy number)...this entices them to do the deal, and if you do close and rehab in 30-45 days, they are willing to do it again. I feel this is fair because both parties can win.
2% flat rat for 30 days is actually 24% annually (crazy number)...this entices them to do the deal, and if you do close and rehab in 30-45 days, they are willing to do it again. I feel this is fair because both parties can win.
That is very lucrative information. Thank you so much.
Investor · Livingston, TN · Member since 2016 · 155 posts · 112 votes
6y
@Nitin John Abraham I don't use fannie/freddie....if you get a hard money lend and buy a house with cash, on paper you own it outright...so you can walk into the bank the next day and put it on a note...ive done it...I do it, that's my modified BRRRR...its quicker and allows you to expand faster too. Let me know if you have any other questions.
Rental Property Investor · Oakland, CA · Member since 2019 · 80 posts · 22 votes
6y
@Cody Campbell I bought two houses for cash, rehabbed them and took them to the bank. They said all they could do was the purchase plus rehab Costs not at the new appraised value.
Investor · Livingston, TN · Member since 2016 · 155 posts · 112 votes
6y
Sounds like you need to look at other banks, having multiple options is great, I'm not sure why they wouldn't go with the new appraisal. I think I'm missing something, most banks will want to appraise the property. Even if you called the big national banks, tell them what you feel the value is and you to refinance with cash out and they will send an appraiser out to make sure it appraises for what you think its worth.
Investor · Memphis, TN · Member since 2013 · 741 posts · 845 votes
6y
@Nitin John Abraham, hey it is 100% possible to get a Fannie Loan and bypass the seasoning requirement. It is called the delayed financing exemption or the no cash out refi! Once you close on a property with your cash or the cash of a private money lender you can immediately refinance out and get a loan up to 75% of the appraised value or your actually cost (purchase + rehab) which ever number is lower. This can be done immediately there is NO seasoning requirement. My entire portfolio was built on this and my clients are doing it everyday!
You need to work with a lender that understands the delayed financing exemption!
@Nitin John Abraham, hey it is 100% possible to get a Fannie Loan and bypass the seasoning requirement. It is called the delayed financing exemption or the no cash out refi! Once you close on a property with your cash or the cash of a private money lender you can immediately refinance out and get a loan up to 75% of the appraised value or your actually cost (purchase + rehab) which ever number is lower. This can be done immediately there is NO seasoning requirement. My entire portfolio was built on this and my clients are doing it everyday!
You need to work with a lender that understands the delayed financing exemption!
@Stephen Akindona - yes im aware of the delayed financing exception. i was trying to get 75% of the appraised value and not the purchase + rehab. That was the issue.