What a Great Problem to Have!!! - Posted by Greg

Posted by David Butler on December 08, 2000 at 16:15:46:

Hello Greg,

You’re telling me :wink: Sounds like the kind of problem we would all like to have on a regular basis!!!

And it sounds like you have several options to look at here… but, I am just a bit confused about what you need - $15k or $30k??? You need $15k for the seller, and if I am following you here, another $15k for fix-up???

In any event, don’t get caught in the trap of being interest rate sensitive to the point of having tunnel vision. I am confounded that your bank won’t give you a loan on #2 for $30,000… but you should be able to get that money somewhere all day long, and absolute worst case paying maybe 8 points and 10% interest. To put that in perspective, you would shell out roughly $3,000 in closing the loan, and be looking at $322 per month on a 15 year note… to lay into a deal that gives you $35,000 built-in equity going in, and approx $675 free cash flow at the premium rents. The additional $400 in monthly rent pays the $322 and leaves you with $78 net cash flow on that differential, plus gives you additional tax write-offs, and substantial upside by way of appreciation and equity build-up.

Based on what information you have provided, I have to believe you can do better… but if not, WHO CARES ;-), right?

But I would give Ed Garcia a call TODAY and get the ball rolling on some more financing!

By the way, I’ve had occasion to use those unsecured checks I get from Beneficial Finance to close out deals, and those things run at 30% to 36% depending on payback and front end charge. I’ve done that holding notes for a short time, and still make a very good lick, because the cost is relative. They are quick and clean, and almost no paperwork… on $15k, the difference in the two year payback terms between 36% and 10% is $194 per month ($886 - $692), and with a six month holding period cost me $1,164 difference, and I net out $5,000 and up in profits. Hey, when I can beat that great, but when I can’t - SO WHAT???

Hope this helps, and best wishes for your continued success!

David P. Butler

What a Great Problem to Have!!! - Posted by Greg

Posted by Greg on December 08, 2000 at 11:32:09:

This forum is just excellent. Now I am looking to my fellow real estate investors for advice. Which pot of money is the easiest and quickest to tap into?

I need $15K to make repairs to a SFR I am purchasing in 2 weeks. The property is in cosmetically poor condition. These repais will greatly boost its value and allow me to get premium rent for the property. In your experience, which pot of money is the easiest and quickest to tap to get the $15K?

Closing on a SFR 3/2 in 2 weeks.
Property is in Arizona.
Price is $103K.
Appaisal came in at $138K as is.
Seller very motivated due to family trust situation and wants out now (other family members want their money).
We are conventionally financed at 6.75%, 10% down payment, $92,700 loan amount,PITI is about $825.
Seller will not carry back a note for $15K.

Property really needs $15K in improvements to demand premium rent.
Regular rents in area are about $1,100.
Premium rents in area are $1,500 and up for the "really nice houses."
Neighborhood rapidly increasing in value.
Long-term objective is rental.
We’re very handy and would do the work ourselves.

Other rental SFR property #1: Value is $95K, owe $55K at 6.5%, PITI is $491, Leased currently for $795 a month.
Other rental SFR property #2: Value is $85K, owe $0K, currently leased for $625 a month.
Credit scores range 640 to 670.

My first thought is to take a credit line out on rental property #2 for the $15K. However the bank didn’t want to loan the money on a rental property. Same answer for a credit line on rental property #1. We would rather not take out a signature loan and pay a high interest rate.

Where would you get the $15K? Any ideas appreciated?

Screw the bank, find a broker - Posted by vic

Posted by vic on December 10, 2000 at 16:04:14:

Banks dont wanna loan maney to anyone who needs it.
We were turned down by 2 banks and then we talked to a broker and he got us a 100% financing(had to pay $2400 in closing costs) an a 100K home that was worth $160K after a few repairs.

The guy at the bank gets paid either way but a broker doesnt collect unless he finds you a loan.