Should I Use Hard Money For Multi Unit Down
I have an opportunity to buy 28 units at 475k. All units are rented at $325 each (Studios in Indiana)I have sufficient equity in my house for a collaterral on the hard money to be used for the down payment. Seller is willing to carry for 3 years. I know in order to pay the hard money man I need to refi in a year. What do you think of this move.
brainstorm,
it's definitely "creative." but the cost of money is probably much higher. if you have sufficient equity in your home, what about a HELOC? The cost of money is much cheaper and you don't have a stringent term of 1 or 2 years to work with. Just my thoughts.
How much is the down payment and what are the owner financing terms?
What is the hard money terms and how much are you borrowing?
How much equity do you have in your house today?
So the hard money lender would use your personal home for collateral, then you would refi and have enough equity to pay the hard.
By the way, it seems like maybe too good a deal. Have you had the apartments inspected? How much repair is required. Are you sure they are rented for $325 each?
Brenda
Thanks for the reply. I have been told that commercial financing usually requires 25 to 30 percent down. I have been shared by the agent that the owner is also willing to carry. So what option is best? I still need to borrow down payment from another source besides my equity in my personal home due to only getting 80% of what I realy need due to my blemished credit. So I thought hard money man I usually use for my flippers said he is willing to carry a second for a year though. The rents are true due to calling the apartment mangr myself (anonymous, prtndng to be a renter. She told me there were no vacancies due to favorable units and low turnover. So how risky is this deal?
Would the property appraise for more?
An idea is to have your trust/entity/or partner sign a purchase agreement to buy the property for $475k.
Then you in turn sign a purchase agreement from your trust/entity/partner to buy for lets say $678k (30% markup). You borrow $203k from your HELOC to put down on the mortgage and the seller (which is your trust/entity/or partner) receives $203k is "profit" from the deal.
You have just done a no down payment deal. The property must appraise for more than you are buying it for and the lender must not care about seasoning.
[ Edited by myfrogger on Date 09/02/2004 ]
I think I will take the collateral route with the bank. I did not think of this. I will keep you guys posted. Thanks.
By the way...whats a heloc? And what are some of the banks that might cross collateral you have heard of.
Who pays utilities?
HELOC = Home Equity Line of Credit
Just a reminder: Extensive due diligence is required. Do not forget the local city and EPA to uncover new or outstanding issues. When looking at properties in unfamiliar locations, during the due diligence visit the location and interview the neighbors.
Good luck,
Eric & Rosa
[addsig]
Thanks for the due diligence. I will keep it mind. thank you.
wow, Ruman's question it it right on. Don't overlook this question.
If owner pays utilities your projected cash flow picture went right out the window.