Personal loan for purchase and rehab?

Question

I am currently looking at a deal and before moving forward wanted opinions on what I am missing. I currently have two SFH that were both purchased ready to rent. The SFH I'm looking at does require quite a bit of work but I'm looking at the BRRR strategy to minimize the amount of cash I have tied up. These are the numbers:

Purchase: $19K

Rehab: $25K

ARV:$60K

The personal loan I have been approved for is $41500 for 7yrs at 10.175%.

My credit union will do a refinance on the home at 75% LTV once repairs are complete' and I have a tenant in place. It will rent for $750.

The estimated rehab time is 2-3 months.

Is there anything in missing? Thanks for your feedback and input.

Account Closed · Answer

Although your idea is fine but it will be somewhat costlier to you. Have you calculated its EMI on the basis of Home loan EMI calculator. I know that buying a house so cheap is a very hard process, but as per my practical knowledge in the field, you are on the right path. You can try for Home loan EMI calculator here  emicalculators.in  .

Angela DeBorja · Answer

Thank you @Kelly Wiggs.

Kelly Wiggs · Answer

@Angela DeBorja it's through a different bank- one I have the loans on my rental properties with.  I would use them for this rehab, but they told me they don't have much of an appetite for properties in this price range- hence the use of the credit union.

Angela DeBorja · Answer

@Kelly Wiggs nice job. Sounds like  our current approach. Was the personal loan through the credit union as well or through another bank?

Kelly Wiggs · Answer

@Rich Baer thanks for your thoughts. I went that way with the last rental I bought. Going forward I like the idea of adding value through a rehab and not having as much cash tied up which allows me to add more properties faster than buying them rent ready. The numbers on this one look like I'll break even or have about 5k left in it. It's really the experience in doing a rehab and refinance that I'm looking for so I'm able to use my credit union more.

Rich Baer · Answer

@Kelly Wiggs

Seems fine to me. However, with closing costs, rehab costs (always more than you estimate) and interest payments you will in for around $50,000 on a $60,000 house. If those numbers work for you, why not try to buy a similar renovated house for around $50,000 and do away with the big repairs and other costs? I recently purchased a $80,000 rental house in Baltimore for $16,000. My total costs, with lead remediation, are now around $40,000. I should have bought a similar house in the neighborhood for $55,000 and saved myself the aggravation. The lure of buying a house so cheaply is just so hard to pass up. But I think you are on the right track.