That is a no-brainer. There are many loans out there that can help you get a fixer both for owner occupants and for investors. We will look at a few for you, while the FHA 203k loan program is not an option for investors
<!--[endif]-->Let’s look first at investor options. You have the opportunity to purchase a fixer, a property that needs repairs thinking you are going to fix it up and make a little money on the side. You likely have another job and this is a part-time effort. BEWARE! You are a small fish in a big pond right now. Finding a deal is not as easy as you may think. No one is giving property away (yet), that may come later, but everyone is trying to make a buck in this market. You need to find that investment. I had a young “first time investor” walk into my office the other day only to find out that he didn’t have any money but great credit. The likelihood of him finding something in the traditional manner is not good. You need some seed capital at a minimum, a partner with money if you don’t have any of your own. Maybe a few partners and spread the risk. Now, where to start looking for properties? Good question. I recommend that you Google “REIA” and your state or city and you will be amazed at how many Real Estate Investment Associations exist close to you. Find out when they meet and go to the meeting. They are set up to train you and for the most part they will do it for FREE. In that meeting you will ask to meet some “property wholesalers” and then go talk to them. There typically are more than one in each REIA group and they are happy to assist you in finding a good property for you to sink your teeth into. a property that you can turn a profit and put a little money back in your account. They are willing to help you in case you are successful, you may come back and purchase more properties from them.
There will be some “hard money” lenders in the meeting hoping you might consider paying them high points and fees and then borrower the “construction money” from them at more fees and points. This is NOT the best way to go but it is a good way to go broke. Be careful please. You don’t want all of your money to go into their pockets.
Let’s say you have the money to purchase the property with all cash. That is a good start, but everything you have read says use OPM (Other People’s Money) so you then own the property and need the “construction money” to get the work done. The smaller renovation projects can be done with a “Title 1” loan if you can find a lender for that loan (they are out there and maybe one or more will identify themselves to us for you). The “construction loan” is likely to have high points and higher than typical interest as it is considered a “high risk” loan. So maybe you end up paying 10-15% interest but you only get this loan for 6-9 months in most cases so if you haven’t sold the building in that time period you may have to get a new loan or renew that loan and pay points again. See how this erodes your profits? Or, you get a “take out loan” that is a longer term loan that “takes out” this loan, oh, it costs more points, darn it.
You paid high interest and gave up your “first loan position” so the lender would make this “construction loan” and if you can’t get a take out loan they can foreclose on you and take the property that you paid cash for an fixed up from you. There are better ways to become an investor especially for new investors getting their first or first few properties.
The simpler way is to use an investor loan from one of our lender partners. Yes, they are available to inviestors (not the FHA 203k) and they work very similarly to the FHA 203k loan program. The interesting this are this: 1) Low interest money, 2) Fixed rate for 30 years so there is no having to refinance out of it when you finish, 3) Some of these loans are one-time assumeable.Want more info talk to "Ed Rogers - Renovation lender at Wells Fargo Home Mortgage" and ask him about his "investor loan programs" be sure to tell him we sent you.
Why would we send you there? We can still help the client by creating a bid specification and insuring the client gets a "reasonable" price for the work at hand.
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