Usa Finance Challenges

[chadsimons]

Hi All,

I'd be interested to know if anyone is having challenges with obtaining USA finance at the moment. Especially on purchase prices under $70kUSD.I am currently doing rehabs in Texas.Because the banks will only let you borrow on the purchase price value, it dosnt make any sense to pay all the fees associated in setting up the loan, when in 8 weeks time for example, you are going to want to re finance your property at its improved value! I have found a hard money lender who I am going to trial and see how it works. They assess the works that will be taking place and get the property valued at what the improved value will be. They let you borrow 70% of the improved value. It is a perfect option for rehabbing as it allows you to put minimum money down and then refinance with a traditional lender after completion.To give you an idea on how my property will look: (Hopefully)

PURCHASE PRICE: $58KUSD
RENOVATION COSTS: $18KUSD
TOTAL PURCHASE COSTS: $76KUSD

Appraisal value after completion: $95kUSD, Therefore I can borrow 70% of $95k.

Borrowed amount:$66500.00

Balance to complete works is $9500USD
Loan set up fee is 3% of borrowed funds: $1995USD
Appraisal/Valuation fee $350USD

Total: $11,845.00USD cash outlayed

Cash is definately the best option in the attempt to minimise fees etc, but this may prove to be a good option for those like myself who dont have all the cash funds but enough to cover a deposit etc.I will keep you posted on this forum as to how it works out.
I am also working with a series of Vendors in both NY & TX who own numerous properties and who are interest in selling their properties on vendor terms with a 20% deposit and the balance of the loan repaid over say 15 years at say 6.75%.It is in the negotiation stages, but things are looking promising and there may be some good options avaliable on this in the new year.

If anyone else has any insights into the USA finance options, feel free to share them.

Happy investing!

Chad

 

[APerry]

Hi Chad,

I have quite a bit of experience in working with Aussie investors purchasing properties in the US. The major problem for them has been that most are paying too much for low quality properties, which are also being managed poorly. It is therefore not surprising that they are having difficulty with finance as the lenders have serious concerns re both the security they are being offerred and the ability of the properties to pay for themselves.

Having said this, there are also some investors that have put in the hard yards, are buying well and have established relationships with good property managers and rehab specialists. It is not nearly as difficult to get finance for these people.

Regards
Alistair

 

[chadsimons]

Alistair,

Thanks for your reply. I couldnt agree more about your comments about investors paying to much for the low end properties. I think clients really need to do their due diligence. It is well worth establishing solid relationships with good property managers, contractors etc, otherwise you can easily get stung. Getting a pre approval in place first "subject to an evaluation" will also liminate the risk to investors. Paying cash for deals first and then applying for finance after closing can potentially be a little risky unless you have some type of guarentee of the value of the purchase.

There are definately some great opportunities avaliable in the current USA market.Providing people take care and do there research and formalise those key contacts, as you mentioned you could do quite well.

Regards

Chad

 

[APerry]

Chad,

Pre approvals in the US are not worth the paper they are written on. Definately purchasing subject to finance and valuation is a must.

Regards
Alistair

 

[mitchmakhan]

Chad,

Hard money is the go for the rehab, then refi out.....try the County Courthouse mortgage records, look for loans that have been approved in the last 2 or 3 months, look for lenders that are not banks etc,,,like John Smith LLC, or Lending Solutions LLC, and disregard the big banks etc....Bank of America, get their number form the records and call em....

Mitch

 

[chadsimons]

hard money

Hard money is a definate option Mitch. I have been in touch with Lending Solutions as well and will be doing a couple of deals through them. The only issue is how to get around the seasoning issue when wanting to refinance. I am currently finding wholesale deals at around 20-25% under market value so the hard money will work well with these as I intend to flip them. For buy and hold, providing we can refinace quickly, it is an excellent leveraging tool.Thanks for the tip on the courthouse mortgage records. Do you know of any good hard money lenders in Buffalo as well. I am doing some hud rehabs there as we speak but having to put cash into it all.

Is there a specific link to the courthouse records? I will do a search in google to find it. Will also ask my contacts in Texas if they can get me the contact details.

Thanks again for your tips.Greatly appreciated.

Regards

Chad