1st Rehab Problem w/Lenders
First of all I'm new to RE investing. I have a residential construction/renovation background & am confident in my abilities to handle most problems. However, this is my first attempt to buy property besides my own home.
Now to my problem: Found Owner willing to sell TownHouse for $117.5K(ask). Typical value in neighborhood $120K-$127K depending on sqftg. Home requires $2500-$3000 approx in repairs & appliances. Owner is unwilling to carryback but has sufficient equity that $114.5K(initial offer. Note: No earnest $ has changed hands yet) will give a nice profit for him. I have some $$ to invest but I am unwilling to provide full 20% requried by local lenders. So far I have not allowed a pre-approval process with a credit report (I don't want to be denied as I've read that is detrimental to getting loans). I've only supplied my current financial situation in total and received an estimated approval amount. The 2 lenders I've approached say I do not make enough to purchase the property even though I've stated that I can expect rents of $1200-$1225 or I can sell for the going rate w/in a 1mo or 2 after the rehab.
Where are you all getting your financing and are any of you experiencing the problems that I am? If you have a solution to where I can find a more accomodating lender please let me know. If it is a problem of the credit report(I'm thinking) I can take care of that but I would like some kind of confimation from some other investors first.
Found this site on a Google search. I hope you all will be more willing to accept newbies than other sites. I need a response asap as my sellor is ready to deal.
Thanks in advance for your reponses,
Tucker_65
Tucker_65,
This seller doesn't sound too motivated to me. You want to find a motivated seller who is willing to work with your terms. You can find creative ways acquiring this property if you have a seller who is motivated enough.
What profits are you planning on making from this deal? You say it is going to make a "nice profit for him." As a creative real estate investor, you should be worrying about your profits, not his. This should be run like a business and if you aren't making any money from the business, then what's the point in starting one?
I suggest you move on to a more motivated seller. If you want a mortgage loan, then you should look for a mortgage broker. You can either ask them to qualify you for an investment property, or ask them to refer you to a lender who works with investors. BEWARE of interest-only loans, balloon payments, and hard money loans when it comes to rental properties. You may want to read up on "subject-to" investing, where you take over the seller's existing mortgage.
Tanya
Tanya,
I was expecting a resale of approx $122.5K w/o a realtor's commission. If I employ a realtor then I would not get any return at all. This is based on an ARM @4.5% or so. If I rent then my expected monthly income would be $289 until I can sell it.
From your response it looks like I need to try & get the other 10% from the sellor vs. the lender.
What do you think? Should I pass on this one & still look for a more movtivated sellor? I'm in Miami & right now the market is definately a Sellor's market.
Tucker
Tucker - you need to decide what it is that you want to accomplish. If this is for resale, I would not recommend you going forward because there is not enough profit in the deal to make it worthwhile. You should only do deals that net you at least $10,000....if nothing goes right. Aim for $20K with a minimum of $10k. On the other hand, if you will be renting or lease optioning the property, then financing becomes the primary issue. To make a good investment in a rental property, you should be able to purchase a property, putting 10% down, financing 90%, and still see a small monthly cash flow. If you can't see a small cash flow, then I don't recommend going forward. There are better deals to be found. Alsd, don't base things on adjustable rate mortgages. Your payments will go up and there goes your cash flow. 90% investor financing can be obtained in the 6.5% to 7% range if your credit is decent.
I help investors acquire and then sell properties at a profit. I do this through financing. I have been in the mortgage busines for 20 years. I enjoy working with investors because I like to invest also but don't have the time to scout deals. Some of the investors that I work with partner with me. Also, since I help them sell their peoperties, I get buyers that use my services. If you would like to continue this conversation, I can be reached at ron@mtg123.com. Good luck.
Ask your lenders about reduced documentation loans or full no documentation loans. So far it's working for us. These are based on your credit and the value of the property alone.
Good luck. I can recommend a loan guy for you if you want. I am in Wa state and my banker is in california. Am on my third loan with them
I agree with Tanya, if you don't have at least $10,000 in profit, pass it up, there are plenty of motivated sellers out there.
Get your financials organised first, see as many lenders as needed to get one you can work with, or check the offer by ronborg. Then place ad in the papers along the line of " We buy houses for cash, call........" then pick the ones suitable for you. With the rest start networking and pass the deals on to others.