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Buying an REO house with cash to flip. will require remodeling of course. After taking cash possession of the house, what are my finance options (if I choose that route) to pull my cash back out and possibly finance the remodel costs?
More Background if it helps:
180k neighborhood. Town reassement was just a few years ago and assessed at 195! Buying around 55k. (its not 100% agreed but comments indicate we are close).
I am 100% buying cash (55k + closing). I also have money avail to handle the remodeling, and still continue to live. ha
Ideally though after I take possession and have 100% equity, I'd like to get bank financing:
1) at minimum would like finance the equity and get that back into my account. Feels safer to have the cash back, and the payment is easy to pay. Even if its just 75% of the 55k ($40,000) then that covers most of the remodel costs.
2) If not too difficult, would be great if a lender would lend more money to fully cover purchase (pay back to me) and remodel, recognizing the full value of the home (say 100k total because the bank recognizes the place is worth a lot more even in its current state)
Is this a straight up mortgage/heloc situation? or are there other options?
Probably many say this same statement... wasn't sure if this is a mortgage, reo or general topic, so I posted in general.
If you are buying to flip, how long are you planning to hold it (between buying, repairing and selling)
I do similar to what you described in your plan but my timeline are usually 1-2 years from purchase to resell. My purchase is usually from HELOC of my other rental properties. If the house isn't going to be flip, I get it fixed up and have tenants in within 3 months and season it for at least a year before attempting to obtain a 50% HELOC on the property (don't have to use it.. just establish it). I avoid using traditional mortgages for RE purchases.
One of my other method of funding the purchasing/renovation is using 0% CC with 1%-2% transaction fees for 15-18 months. I just have to make sure I have a backup plan going this method.
Buying an REO house with cash to flip. will require remodeling of course. After taking cash possession of the house, what are my finance options (if I choose that route) to pull my cash back out and possibly finance the remodel costs?
More Background if it helps:
180k neighborhood. Town reassement was just a few years ago and assessed at 195! Buying around 55k. (its not 100% agreed but comments indicate we are close).
I am 100% buying cash (55k + closing). I also have money avail to handle the remodeling, and still continue to live. ha
Ideally though after I take possession and have 100% equity, I'd like to get bank financing:
1) at minimum would like finance the equity and get that back into my account. Feels safer to have the cash back, and the payment is easy to pay. Even if its just 75% of the 55k ($40,000) then that covers most of the remodel costs.
2) If not too difficult, would be great if a lender would lend more money to fully cover purchase (pay back to me) and remodel, recognizing the full value of the home (say 100k total because the bank recognizes the place is worth a lot more even in its current state)
Is this a straight up mortgage/heloc situation? or are there other options?
Probably many say this same statement... wasn't sure if this is a mortgage, reo or general topic, so I posted in general.
If you aren't going to be holding the property for very long, you should focus on minimizing closing costs and points.
If you have all the money to do the remodel, why are you getting a loan you don't need? Seems you are wasting a decent sum on closing costs and interest.
If your answer is "liquidity", consider just opening up a personal line of credit (PLOC) and not using it except as an emergency cushion. Yes, the interest rate is a bit higher, but this is more than made up for by not having to pay points or closing costs.
If you think you need to borrow $100k just for a cushion, I would say this borderlines on paranoia. I mean, what are you worried about? That you'll go to the ER and your health insurance company will go bankrupt the same day?
If you are buying to flip, how long are you planning to hold it (between buying, repairing and selling)
I do similar to what you described in your plan but my timeline are usually 1-2 years from purchase to resell. My purchase is usually from HELOC of my other rental properties. If the house isn't going to be flip, I get it fixed up and have tenants in within 3 months and season it for at least a year before attempting to obtain a 50% HELOC on the property (don't have to use it.. just establish it). I avoid using traditional mortgages for RE purchases.
One of my other method of funding the purchasing/renovation is using 0% CC with 1%-2% transaction fees for 15-18 months. I just have to make sure I have a backup plan going this method.
Excellent information. thank you
My initial thought is buy and flip, but yes the town is a good renters town and renting is a strong option. (Honestly I know I have time and options going forward to decide on)
I'd love to get into the situation that you are in and think I'd be there quickly after one or two successful deals (tp build up a little more cash so that I have money to buy/remodel and live).
Re: CC...
I have additional money for remodel, 401k loan option, and credit cards.. as part of the remodeling pool of funds.
I see we are local (I've noticed your U/N in other threads ). I may be pinging you for more info.
the overall paranoia is... this would be my first true flip. Not completely blind/new to this. My son has been doing large remodeling projects for years (kitchens, baths, pavers), and last year we completely remodeled 2 house. The one I was moving into, and the one we moved out of.
The "moving out of house" was close to a flip. We floated two mortgages, moving first. Then went back to old house and remodeled for sale and got top of the market for it.
Which essentially had me decide... we (my son and I) already did this in a round about way, lets now jump into a pure investment property.
So all that wordy background is to say: While we know what we are getting into, and have recently managed two homes at once, still have some uneasiness regarding tieing up a big part of our savings into an investment (even short term)
Quote:
Originally Posted by ncole1
If you aren't going to be holding the property for very long, you should focus on minimizing closing costs and points.
If you have all the money to do the remodel, why are you getting a loan you don't need? Seems you are wasting a decent sum on closing costs and interest.
saving costs would be ideal, but since its our first effort I am more ok with giving up some profit for a comforting easy feeling.
Quote:
Originally Posted by ncole1
If your answer is "liquidity", consider just opening up a personal line of credit (PLOC) and not using it except as an emergency cushion. Yes, the interest rate is a bit higher, but this is more than made up for by not having to pay points or closing costs.
If you think you need to borrow $100k just for a cushion, I would say this borderlines on paranoia. I mean, what are you worried about? That you'll go to the ER and your health insurance company will go bankrupt the same day?
I hadn't really considered a PLOC! We are in good financial standing but just assumed it wouldn't be large enough. But worth my checking into.
EDIT: the full remodel costs are a combination of additional savings, CC and 401k loan all of which have costs associated already... so would be cleaner to just have as a loan.
Town reassement was just a few years ago and assessed at 195! Buying around 55k.
Town tax assessments are for paying taxes only! They mean nothing! Obviously proven by the fact that your buying it for $55k and they are taxing it at $195k.
Town tax assessments are for paying taxes only! They mean nothing! Obviously proven by the fact that your buying it for $55k and they are taxing it at $195k.
sorry.. I should have known better than to include that buzzword. ha
Absolutely, positively don't do the 401k loan. Wanna talk paranoia? Remember this: You lose your job for any reason and that loan has to be paid back within 60 days. Can't pay it back? It's an early distribution that will be taxable and with a 10% penalty. Pretty damn costly loan, I'd say.
Absolutely, positively don't do the 401k loan. Wanna talk paranoia? Remember this: You lose your job for any reason and that loan has to be paid back within 60 days. Can't pay it back? It's an early distribution that will be taxable and with a 10% penalty. Pretty damn costly loan, I'd say.
Well, we don't know all the numbers regarding OP's savings, but perhaps the gap can be covered by doing the more essential repairs first, using other funding sources, to get it mortgageable, and then getting a loan to do the rest of the repairs.
Well, we don't know all the numbers regarding OP's savings, but perhaps the gap can be covered by doing the more essential repairs first, using other funding sources, to get it mortgageable, and then getting a loan to do the rest of the repairs.
Thank you. Absolutely the plan!
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