Minor Rehab - How To Structure The Deal?
Here is my situation: this is my first rehab. The house is worth about $120K in as-is condition, not awful, but not real pretty. With minor rehab about $5K could be sold retail for $155K.
With a profit of $20K after costs of $5K rehab, about $8K to buy and hold it, and $3K closing on the sale.
But the out of pocket costs would be about $33K! Assuming $5K for rehab, $3K for 3 points for $100K 65% after rehab value hard money loan, $20K for downpayment, about $5K for 15% simple interest mortage and utilities for 3 months.
How can I get started with less money?
Should I maybe see if the owner will go for a lease option?
Would you do rehab while you hold a lease option?
How do you normally do minor rehabs? Do you buy them outright with hard money or conventional financing or cash?
I know I could assign it or flip it with no rehab and no OOP...but what if I want to do the minor rehab to get the bigger return?
Anyone willing to comment on this?
using a lease option would be fine for you to do.(if you structure it properly of course)
As long as you can make good on all payments, your time/money investment is secure to do the rehabbing. Then you can flip it. u save alot of your profit this way too i would suspect.
Look at it this way, having money, will make you money. You will see many more deals come and go. I'd get it under contract, and flip it. Ya, you will make less, but use the money you make wisley, and reinvest it in another property. You can say, ..well if i did this.... but just go with whats a definate. Just my 2 cents
[addsig]
Thank you Birddog1 and M_Anderson for your comments. I think I favor the flip/assignment option too, but am glad to know that I can do it rehab with a lease option. I will see what the owner's needs are and see which deal will work best for all. THANKS!
Are you sure about this deal? You say that the house is currently is worth $120K but with only $5K in repairs, it would jump $35K in value? I'd double check those figures.
You don't say, but by your comments, the seller's are asking $120K, correct? If so, what would your offer to them be? (not $120K I hope). Also, are you dealing with a motivated seller? IF not, you probably don't have a deal anyway.
There are many, many ways to structure deals to have less out of pocket expenses. Non-conforming loans, subject to, partners, etc.
Using your figures, I doubt that you'll be able to easily do a flip or assignment with this property.
Roger
Good Day to you:
If you are buying to hold, check out the HUD 203K loans or perhaps check with lenders that will loan based on ARV and it will cost much less.
Good luck and make $$$
Tom