Chicken & egg problem? - Posted by Kim Grassfield

Posted by KimG on June 19, 2003 at 08:02:22:

Hey, I’m sorry, I didn’t connect the dots. ESB is Eastern Savings Bank of course. I thought you were using a real estate acronym I hadn’t heard yet!

Chicken & egg problem? - Posted by Kim Grassfield

Posted by Kim Grassfield on June 17, 2003 at 14:57:28:

Chicken & egg problem?

I am a contractor and a first-time investor who is rehabbing a property with my own cash and sweat, which I originally intended to flip. Life happens quickly some times and I met and married my wife, while halfway through the rehab. We fell in love with the property and want to keep it as our home. Price: $162,500. 20% down payment. ARV: $230,000 to $250,000

Several related problems:

  1. Need cash to complete rehab.
  2. My income (as a licensed building contractor) and all my cash are currently tied up in the property.
  3. Banks won?t extend improvement money cause I am not showing enough income on recent tax statements. (Long story short?was a student for previous two years.)
  4. Without a change in income can?t expect to refy from my own credit/income/equity position.

Question: How do I recover my improvement costs (get income) from the property? Hard money lenders? Partners? What kind of deal should I do?

Re: Chicken & egg problem? - Posted by GMann

Posted by GMann on June 18, 2003 at 09:19:46:

Call Eastern Savings Bank (easternsavingsbank.com). They are a hard money bank. The biggest problem with your situation (outside of income/cash) is the house is in the middle of the construction/rehab process. This knocks out a lot of lenders. Every deal stands on it’s own for ESB. They will lend 65-70% and the rates and fees will prob. be high.

Re: Chicken & egg problem? - Posted by KimG

Posted by KimG on June 19, 2003 at 09:04:09:

Hey GMann, I’m sorry, I didn’t connect the dots. ESB is Eastern Savings Bank of course. I thought you were using a real estate acronym I hadn’t heard yet!

Re: Chicken & egg problem? - Posted by Kim G.

Posted by Kim G. on June 18, 2003 at 12:31:53:

Thanks for the bank information, GMann.

What is ESB? And, what do you mean when you say that every deal stands on its own for ESB? Are you recommending the hard money bank for a bridge loan before refy? That would work if I had a clear exit strategy, but I am still uncertain about my prospects for refinancing.

I could use the bridge loan to pay myself for the contracting work I’ve done and report income to Uncle Sam - paying my quarterly estimated income tax. And, if so, wouldn’t that predispose lenders to extend credit (for refinancing) since I am now showing income?

Or, do you think there’s a simpler solution?