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LooseIntern - Good suggestions.
I agree that the deal really does not work using HM unless the buyer bring some money to the table (LTV too high and/or the closing costs need to be covered).
There might be some raw dollars to be made. The percentages are not in-line. John Corey Manager/Member Chelsea Private Equity, LLC +1 (503) 906 7840 x1108 +1 (503) 210 0227 (efax)
Hi Etebari, You?ll find that there is often allot of advice offered by folks claiming to be hard money lenders but with very little action, regardless of the numbers. As you come across them, don't even waste your time!! Move on!! I will say that you do have a deal here, but maybe not the kind of deal that meets hard money criteria. The problem here is that even if the property has appraised at $280,000, the sell price still represents over 70% of the market value, and that?s not including any other costs or fees. Although there may be a nice cushion built in from an actual equity dollars standpoint, there is not much from a percentage of market value standpoint. And that?s what hard money lenders, and other quick flip candidates, will be concerned about. It?s not that you don?t have a good deal, it may just be that you?re trying to put it together using the wrong model, especially when you only have a few weeks to execute the agreement or lose the deal altogether. For example, this deal may be a perfect opportunity for investors in the area who buy and hold properties to lease out. They aren?t always concerned about the quick flip dollars. Many use these as moderate cashflow generators, and the tax benefits. Plus, they also look at the equity dollars, which in this case may be attractive. And they deal with lenders (traditional or otherwise) that will finance them often at up to 80% LTV. You might consider assigning the contract over to such an investor for a fee rather than lose the contract. (Consult an attorney in your area to ensure that you do it legally and correctly.) It would help if you also found the individual who will in turn lease the property from the investor. There are some property management groups that work with investors and have a waiting list of folks waiting to lease homes at various prices. It?s worth a try. Hope this helps.M. Corey, unfortunately I have to add the closing cost on top of the 204K. I previously talked to you about these deals, they are finally being presented to me. I have never dealt with any hard money lender and I finally get to understand how you guys operate. At the end of the day, if conditions apply I will put in about 25K. This deal is solid, before the FDIC put this porperty out of the market the selling agent had a contract for 260K on it. my ROI should be around 150% to 200%, with no cash down almost infiniti. Peyman,
You are looking for approximately 73% LTV. Many (most?, all?) hard
money lenders will not go this high. We stop at 65% LTV and others
stop at 70%. Any flexibility on price or terms? Can the seller carry
a small second? Do you have some cash in the deal? What about the
closing costs? Have you rolled them in already or are you expecting
to add those on top (and raise the LTV)?
We will sometimes partner with a second investor who funds the
difference above the HM. Not the best idea in many cases as it really
does start to eat into the profit.
BTW - If you want greater than 65% LTV or 70% LTV from a HML expect
that they will start asking all kinds of questions about credit,
track record, cash in the deal, cash reserves. The loan is
effectively morphing from 'hard money' to non-conforming. As the LTV
goes up you are asking the lender to take a lot more risk so they
want to know a lot more about your ability to perform.
John Corey
Manager/Member
Chelsea Private Equity, LLC
+1 (503) 906 7840 x1108
+1 (503) 210 0227 (efax)
On Dec 19, 2005, at 13:50, etebari_peyman wrote:
> Hi,
> I need to buy a house at $204,000.
> Appraisal value is about $280,000. Excellent condition, just painted
> new carpet........... No repiars at all!!!!
> I need to find hard money lenders. Please send me the best packages
> that you may have.
>
> We have to close by 01/15/06. We will hold the property for maximum a
> year, we obviously want to flip it.
>
> Thanks a lot,
> Peyman Etebari. VE National - Principal
>
>
>
>
>
>
>
>
>
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