Where Do You Get Your Financing?

[lazyzealot]

Okay,

Hi all, I'm new to this and have a basic question:

If a house appraises for 50K and required approx 45K to
rehab, where do you get the money for the rehab? (Assume
ARV of 150K or so). Do most of you get this from a bank,
personal/business assets, or hard money lenders?

I have found a property that I could buy outright if I had to,
but won't be able to pay for the rehab outright...

Wondering what to do.... Any help would be appreciated!


Thanks!


Todd

[cserviss]

Todd,

I typically use hard money for my deals. You pay higher interest, but the loan is based on equity not your personal credit. The process is much faster and less paperwork/documentation intense than traditional financing. I see you are in Maryland I may have a lender that would work in your area. How far are you from a metro area (Baltimore specifically).

[BrandonModrov]

If it's your first rehab I would say just get it done and not worry about making a ton of money. So I would suggest using a hard money lender like www.brookviewfinancial.com or a local HML if you find one that will work with you.

Like the above mentioned post it will be based on the deal and not you.

If you like rehabbing and you get the hang of it and have a few deals under your belt (make sure you build a portfolio the whole time) go and find some private lenders who will use their own cash.

Private lenders will give you the cash at a much cheaper rate. But most want to see some proof you know what your doing from my experience.

Let us know how it goes.

[BrandonModrov]

Scott a member on here asked me a question about what I meant by a portfolio so I thought I would answer it here for everyone if they also had the same question.

When you are trying to do your first few deals it may be tough to get the best financing so you simply go with what you can get just to get your business gets off the ground.

It's fine if you don't make a fortunate yet. I mean by a portfolio is like an artist has a portfolio of all their past works to show.

So as you do your first few deals be certainly sure to take lots of pictures, even video and document the whole thing.

This is important so that when you go and try and find cheaper private money you can say, "Here take a look at my previous deals from start to finish."

Documenting things like before and after shots, commentary and the breakdown of the entire rehab.

Hopefully that helps answer any questions.

Brandon :)

[Debbie]

.....Wondering what to do.... Any help would be appreciated!

To this day, the money we used for buying/rehabbing came from our savings for down payments and re-fi. I know that won't always happen....


It's fine if you don't make a fortunate yet. I mean by a portfolio is like an artist has a portfolio of all their past works to show.

So as you do your first few deals be certainly sure to take lots of pictures, even video and document the whole thing.

This is important so that when you go and try and find cheaper private money you can say, "Here take a look at my previous deals from start to finish."

Documenting things like before and after shots, commentary and the breakdown of the entire rehab.

Hopefully that helps answer any questions.

Brandon :)

Excellent Brandon! I never quite thought of doing that way....

[Randy (SELA)]

I get rehab loans from my bank. Purchase and rehab money is included in the loan

[lazyzealot]

Wow, that was a lot of responses in a short time! I'm amazed.
Thanks everyone...

Cserviss, to answer your question I'm in Upper Marlboro, MD
so I'm about 25 miles or so from Baltimore (which is the area I'm
looking to invest in).

Randy, a question: When you say rehab loan do you just mean
a regular 30 yr mortgage with rehab costs lumped in with the cost
of the house? How do that work with the appraisal of the value
of the house and the granting of a higher loan? Is this a standard
process that lenders do, understanding that the current home will
be worth much more when you rehab it or is this a special relationship
you have with your bank manager? BTW, I'm from Houma!


Thanks to all....


Todd

[Randy (SELA)]

Yes, everything is rolled into one loan. My bank will only go 20 years on rehab loan, and the interest rate is a little higher than a typical 30 yr, but much lower than hard money They will loan up to 80% of the ARV of the house. It all depends on the ARV number the appraiser comes up with. I can refinance and cash out into 30 year fixed after I've had a property for a while, but for now I'm using the equity for a credit line. I'm still a rookie at this, but that's how I'm working. It should not be hard to find out which banks the investors in your area are using. Hope that helps

[Bluestarhomes]

We borrow money for our down payment and rehab/holding costs.

[rmmtg]

I am a broker and investor in Florida and have always used hardmoney and then reif'ed if i had the property 6mos or more. hard money is higher on intrest but like the other said it is all on the arv numbers always consult with your appraiser on your numbers first I have alot of hd/mny contacts in most states so if you need my help pm me no problem

[lazyzealot]

All,

Thanks for the answers again everyone. You've been extremely
helpful. I love this site!


Todd

[Peach State Property Buyers]

My mom's ex-boyfriend is from Houma. His name is Robert Hebert (sp.?)

[Randy (SELA)]

The Cajun Cannon?

[wellsman]

I took a line of credit out on my home and used that for the rehab. Another option is looking for a bank that doesn't have seasoning on taking out a line of credit on the investment house after you close.

[topfuel]

Okay,

Hi all, I'm new to this and have a basic question:

If a house appraises for 50K and required approx 45K to
rehab, where do you get the money for the rehab? (Assume
ARV of 150K or so). Do most of you get this from a bank,
personal/business assets, or hard money lenders?

I have found a property that I could buy outright if I had to,
but won't be able to pay for the rehab outright...

Wondering what to do.... Any help would be appreciated!


Thanks!


Todd

Don't forget HML will demand that you have a certain minimum FICO score and they'll insist that you have x amount of capital reserves. They all have their own guidelines but most are as described above.