All Forum Posts by: James Alderman

Would getting a loan for the purchase then using my money for the renovation be a better route? That's what I meant to post.

@Andrew Postell thanks for the info. Would obtaining a loan for the purchase and then using my money for the renovations?

The $200k loan would remain under the seller's name, but you'd be making payments on their behalf. That mortgage will have a "due on sale" clause which means that the bank could call the whole loan due because of the sale (and if you don't have the cash, then foreclosure), but they "usually" don't. That's the risk here, but you can mitigate it by purchasing "due on sale" clause insurance which will cover the loan in the event that happens. 

The payments made on the seller's behalf can be "serviced" by a company so that the loan no longer applies to the seller's DTI, if this is something your seller is concerned about.

"Investing in Real Estate With Lease Options and ''Subject-To'' Deals" by Wendy Patton is a good source.

And yes, the remaining amount would be seller-financed, minus any downpayment that you agree on.

@Michael Mason it's a restaurant/apartment conversion into a single vacation rental. Purchase $200k and rehab $150k. ARV around $500k and annual revenue $100k+. It's a unique property which is where I may run into trouble.

Hello BP Community,

I'm looking for recommendations for lenders who can provide a bridge loan for a rehab in Wisconsin. I'll be converting a lakefront restaurant/apartment into a full STR.

Thanks!

Hello BP community!

I'm in talks for a property near a popular vacation destination that I would operate as a short-term rental. I am looking for advice on financing strategies because of the uniqueness of this property. 

The Property

This is a 1.5 acre lakefront property with about 1500 feet of shoreline. The main building on the property is two-story. 3 bed 2 bath apartment on top and a restaurant/bar on the first floor. It has a wraparound bar like you'd see in Cheers. The main dining room has a greenhouse-window outcropping overlooking the lake. I think some conversions could make this into a really cool STR. There are also two cabins and a barn on the property. There will be significant renovations to the main building.

Costs

Asking price: $200k

Renovations: $100-150k

Misc: $25k

Total: $350k

Projections

ARV: $500k

Yearly Revenue: $100-150k

Timeline: 1 year until operational

Finances

I'm thinking along some BRRRR lines here. I am holding $100k that I'm ready to invest in this deal.

I would like to finance the remaining $250k with hard money, through a partnership, or probably a combination of both. Then refinance and get all that money back out.

I'm looking for recommendations of where to look further for bridge loans that could meet this need. Or other types of creative strategies that you might be familiar with. The couple who are selling are looking for a cashout. Thank you!

Congrats on taking the leap! 

You say that you'll be rehabbing the bathroom, kitchen, resurfacing floors, painting and adding a privacy fence, and that it will be adding 20k in value. How much is this rehab going to cost you? That seems like much more than 20k in costs with a contractor.

You'll need to know the Fair Housing Act like the back of your hand. This includes how you are allowed to market the units, like saying "Second-story unit" instead of "No wheelchairs". You'll need to learn how to interact with potential tenants so that you don't accidentally violate the act and get sued. 

Remember your lead disclosures with tenants.

Check with your local government agency about any specific ordinances around landlording and building safety. In the absence of specifics, always use best-practices. A tenant can potentially sue you for any safety issue if they find a willing attorney.

Please, don't.

How much money does he want for his "coaching"? I would 100% recommend against any coaches that reach out via social media. There are some paid coaching/educational people out there (thinking Robuilt) that I would trust, but most are only after your money.

When does the seller need their money?

This sounds like a subject-to/seller-financed opportunity. You could purchase the home subject-to the seller's existing mortgage. In effect, you take over the remaining amount on the mortgage. Let's say the mortgage is $200k.

The remaining balance of the purchase price, let's say it's $300k could be seller-financed minus the downpayment. This is where it gets fun: negotiating the terms. By playing around with the interest rate and schedule, you may be able to afford a higher purchase price. You could delay or split the downpayment into multiple payments even. I purchased a turnkey triplex this way with only $1k down and 2.5% seller's interest rate over 20 years.

Those rates seem about right. I got a 25-year, 20% down, 4.75% back in December, and rates have been on the rise.

How many units are rented/vacant?