Investor · South East Texas · Member since 2019 · 65 posts · 11 votes
So I am trying to buy this deal. The verbal contract is at 45k and needs about 10k in repair. The house has a back apartment. I will end up getting 2k per month from the deal but I am having a hard time finding lenders for it now for it being so low. It is appraised now at 60k and im not sure I can get the appraisal up much higher, maybe 70k. But as a business deal it should be worth at least 100k but the appraisers won't go off of cashflow. Does anyone know a company or a private lender that would be interested?
Mr Walker, your last three posts have been this exact same topic and scenario. "NOT" criticizing. To help, can you clarify, is your objective to find an investor from this forum and you are making a New post to generate fresh responses?
If your objective is to find an investor, I would recommend doing a Post looking for meetups in the Lake Charles, Beaumont, or Houston markets. They will be closer to you and you/they can get personal face to face interaction. Recognize you will have to give up some of the juice, possibly 50%. Make sure both of you are on the same page, fix/flip or long-term passive income.
Your background says your still in College which is great. It will be hard to get financing from a traditional financial institution which I am sure you are aware of, unless you already have some wealth accumulation. If you already have the wealth, then collateralize it. Get the property up and running for a year, then you can show the income stream as some have noted above to get the valuation up. Realize this isn't fitting the BRRR or no money down concepts, but you will need to develop a track record with the property or collateralize your existing assets or show a personal revenue stream.
Another option is to reach out to your Financial, Bank and Legal contacts. Explain the deal and ask them to initiate a meeting with some of their clientele. This will leave them exposed to your success/failure with their existing client, so it has to be a winner on paper and in real life. In other words if you have to drop out of school for a semester to get this project up to revenue generation, you will need to, to save their integrity.
Appraisers are not always the smartest people, but they know what they are doing. If they say it is worth 60k, it is probably worth somewhere right around there. Lets not get crazy and think it is worth 100k or more. Smaller cities tend to be worth way less. Check with a local realtor to see if you could get the rent rates that you are thinking. Also, ask them for a CMA. That should help out.
@Christian Walker is the property greater than 4 units? That will affect the model which the appraiser uses in their valuation, i.e. if it has more than 4 units then they may treat it as a commercial property and use the local cap rate alongside its income. If it's 4 units or less, they may use recently-sold properties as comps whose price-per-square-foot will be a bigger factor in valuing the property. The fewer similar properties there are in the area, the more one appraiser's valuation will differ from another's.
Judging by your comment that the appraiser won't consider cash flow in their model, I'm guessing that it's a 4-unit-or-less multi-family, and that they're using comps. Some lenders *might* be willing consider income from the property once it appears on your tax return, or perhaps once the property is stabilized, i.e. once it has tenants in place who have been paying a verifiable amount of rent for a certain # of years.
Mr Walker, your last three posts have been this exact same topic and scenario. "NOT" criticizing. To help, can you clarify, is your objective to find an investor from this forum and you are making a New post to generate fresh responses?
If your objective is to find an investor, I would recommend doing a Post looking for meetups in the Lake Charles, Beaumont, or Houston markets. They will be closer to you and you/they can get personal face to face interaction. Recognize you will have to give up some of the juice, possibly 50%. Make sure both of you are on the same page, fix/flip or long-term passive income.
Your background says your still in College which is great. It will be hard to get financing from a traditional financial institution which I am sure you are aware of, unless you already have some wealth accumulation. If you already have the wealth, then collateralize it. Get the property up and running for a year, then you can show the income stream as some have noted above to get the valuation up. Realize this isn't fitting the BRRR or no money down concepts, but you will need to develop a track record with the property or collateralize your existing assets or show a personal revenue stream.
Another option is to reach out to your Financial, Bank and Legal contacts. Explain the deal and ask them to initiate a meeting with some of their clientele. This will leave them exposed to your success/failure with their existing client, so it has to be a winner on paper and in real life. In other words if you have to drop out of school for a semester to get this project up to revenue generation, you will need to, to save their integrity.
So I am trying to buy this deal. The verbal contract is at 45k and needs about 10k in repair. The house has a back apartment. I will end up getting 2k per month from the deal but I am having a hard time finding lenders for it now for it being so low. It is appraised now at 60k and im not sure I can get the appraisal up much higher, maybe 70k. But as a business deal it should be worth at least 100k but the appraisers won't go off of cashflow. Does anyone know a company or a private lender that would be interested?
Get a 0%apr credit card and ask to have your limit raised to $45k, there you go! Then you can either sell or refinance at your higher amount.
Im kind of kidding, but if the deal is worth it you will find a way!
1-4 unit properties are appraised using the sales approach. There is no deviation. 5+ units are appraised using the income approach with some weight given to the sales approach.
Your numbers are too tight using the sales approach for this property. If you're buying it for 45K and you're putting 10K into it, you're already at 92% before closing or carrying costs. Even if it will bring in 2k per month, you're buying an investment property that needs renovation way over where you should be.
getting a mortgage for such a low amount is hard to find. The paperwork is the same as it is for a bigger loan, but the mortgage company will not be making any money on such a small amount. You may be able to get a personal loan for that amount. And make the purchase with that cash.
oh, I see you are a college student, so I assume you are young. I'm not sure you can get a personal loan with little credit history.
The best way to go might be to work work work and save the money. You can prove yourself a good risk that way.
A deal with a house and apartment and only 10K in repairs doesn't seem right. Are they both currently leased? Is the deal in SETX? This isn't Houston or another market. What would be a great deal there might not be such a good deal in certain areas of the Golden Triangle. If it's really 2k/month then get it under contract and wholesale it. At least you get something out of the deal