Funding A Rehab...
Hi Guys!
I could really use some help here. Since I haven't bought a house yet, I still don't understand everything...I am dealing with a private lender who specializes in rehabs. I just talked to him on the phone and these are the terms:
They loan 60% of the ARV
Charge 3-6 Points
And 13-14% interest only Pmts.
I am assuming the interest only Pmts. are based on APR, and that the Points are not rolled into the loan, therefore the points charged would be money due on closing? Does this sound common? They say they are able to fund 100% of purchase price and plus 100% of repairs subject to appraisal. They are also flexible on their terms. This is all a little overwhelming at first and I was hoping someone could confirm that I am on the right track. BTW here are the stats on the house:
REO
2/1 Single Family
Listed: $49,900
ARV: $60,000-70,000
Needs new roof
Needs carpet
Needs heater
Unfortunately I have just learned that the two main things a house needs to qualify for traditional financing is a roof certification for the next 3 years and an up to date working heater.
Any input is much appreciated, as my brain is working overtime trying to put things in order.
Thanks, Breanna
Nope, usually these Hard Money guys roll everything into the loan, points closing, everything. Well, SOME of them want the investor to put some into it, but not all. This particular house, I don't see how it'll fly.
70k ARV
42k (70*.6) Max loan from HML
What about points, closing costs, rehab. Nope, RUN, don't walk away from this deal, if you intend to use hard money. Even if you weren't going Hard Money, and had cash for it, it's listed for far too much, considering the amount of rehab you gotta do.
The formula should look like this for an offer on a piece of property: ARV/FMV-profit-repairs-holding/acquisitions cost=offer
Hi Jam,
Thanks for posting! Could you please plug some numbers into your formula for me as an example? Maybe use my numbers to show me how this deal won't work... Thanks, Breanna
65k ARV - median number
39k - (65k*.6) max amount HML will lend
(10k) - profit
(7k) - roof
(8k) - carpet
(5k) - heat pump
(7k) - acquisition costs
(5k) - holding costs
-3k - MAXIMUM offer
In this, they pay YOU $3,000.00 just to take if off their hands. But, the point is, do you see how the formula works?
Ok, That makes sense now! Thank You. I will remember this for future deals. I really appreciate your help.
Breanna