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Real Estate financing a foreclosure

Discussion in 'Real Estate Investing' started by yveskleinsky, Sep 3, 2007.

  1. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    I have potentially found a building that is entering foreclosure. I would love to grab it, but would need money to rehab it. Does anyone have experience with financing foreclosures and/or foreclosure renovations?
     
  2. Allthingznew
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    Allthingznew Contributor

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    No experience, but maybe you could partner with someone(s) who can help finance and/or rennovate?
     
  3. Yankees338
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    Yankees338 Bronze Contributor

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    That was my initial thought. Details, of course, would help here. Will his be a flip or something you will buy and hold? A partner will obviously eat away at some of your profit, but they will bring money to the table, minimize some of the risk, and hopefully bring some knowledge and experience with them. It's probably best to go about it yourself, but if you're a beginner at this, it may not be a bad idea to partner with someone more experienced and take a little less profit.

    Btw, no experience here either.
     
  4. tbsells
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    Financing a foreclosure would work the same as financing any other purchase. Proceed as you normally would if the building was not in foreclosure. The main difference would be in time frame you have to work with. Another possibility you might investigate is a loan assumption. Most loans are not assumable but the bank that has the current mortgage may work with you instead of foreclosing. If you are getting a real good buy on this you could get an equity loan for repairs after the closing.
     
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    Also, lenders tend to treat commercial properties slightly different than with residential. With residential, they are more interested in YOUR credit, income, etc. With commercial properties, they are more keen on the property and CASHFLOW produced by it (although, your credit, income, etc. are still looked at).
     
  6. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    The first step is to find a local commercial loan broker and/or some local banks that lend on these types of deals. The discussion will likely center around a bridge loan. Your job is to determine the potential and find a lender that agrees.

    I have seen banks that will do 80-85% loans based on fixed up values.

    Or:

    Have you talked to the seller? Can you bail them out of foreclosure and perhaps do a wrap loan with them?

    What are the circumstances surrounding this building? More information would be helpful.
     
  7. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    This building is an abandoned hotel/motel. There are 20 motel rooms, owners quarters and a restaurant. I found this building by calling around researching the 9 units I had posted before. I contacted an appraiser to find out the Cap Rate in the area and she said that she was going to be doing an appraisal for a motel- I asked if it was the Aspen, and she said she couldn't say. I am guessing that the bank is having it done. So I suppose now, the next step would be to find out who the owner is and who the bank is.

    My plan would be to keep, hold, set up a team, possibly sell or refi out. I would want to renovate the outside as it is ugly...however it is still in operable shape and could be done in phases- mainly during off seasons- and we could run really low specials just to get people in. WildAmbitions had the idea of turning the restaurant into an internet cafe-which is genius, as there isn't one in town.

    My eyeball estimations of renovations would be close to $70k.
     

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