[chbrules]

I am 21, my brother 19. I have great credit and I suppose, if need be, I have my 335i as collateral? We're looking to get into a little investment situation here...

The situation is, there's an old husband and wife who are moving into some old folks place and they're offering their house of 40+ years as-is. It probably needs a good chunk of work, but it's in good condition, just old. My dad said they said their initial price is $490k. The average prices of homes in our niehgborhood are ~$600k+. If I'm able to get this place for about $475-480k, take out an equity loan, and do a good turn around in 1-2+ months after hard work my brother and I can make good profit. We know a lot of good, cheap contractors and we're handymen in our family. Not to mention we have a lot of friends and people that know about home renovation, including my parents; that's all they ever do with their homes.

Now here's the real situation, what are my options on a home loan? I have great credit (730+), about $1500-2000+ revolving credit, and I some good collateral (car (335i E92), expensive guitars ($3k+), and computers(lots and expensive)). I can't exactly put any down payment on the house, the $30k I have is going down on my 335i. I figure if I get an appraiser to show the bank the real value of the property versus the current value, it would be a win and collateral in itself for them to use for the loan. We're looking to do a 40 year loan just to keep the monthly payments low until we turn it around. Then after I sell the house I can pay off my car loan (in my parents name from their credit union) and have plenty of profit left over to put into my IRA for my own home purchase in the future.

Anyway, does anyone have any advice and/or suggestions? This is my first experience with this.

[Ray]

This will be your key:

Originally Posted by chbrules

I figure if I get an appraiser to show the bank the real value of the property versus the current value, it would be a win and collateral in itself for them to use for the loan.

If the difference is as great as you expect, the lender will confidently issue you a loan. Instead of a $480k loan (subtracting a 20% down), you will seek a $600k loan (0% down).

On the other hand, a line of credit will be extremely difficult since value may be factored as down premium, therefore compensation for repair costs will have to found elsewhere.

The bank will factor your credit history (not just the score), current income and income stability, to ensure that they will confidently recieve their return on investment. Keep in mind that most lenders will be reluctant, or no longer offer a loan with 0% down. If it is still available, it will have an adjustable rate and you better hope that the property sells within that 1-2 month prediction.

I would build up hope only after the appraisal. Do not calculate estimated value, but instead, factor an actual value for the true cost (repair, tax at time of sale, etc.). After you accumulate all your figures, seek the advices of financial consultants, accountants, or real estate agents. Only then will you know if your investment is feasible.

Property investments are always good. But remember, if something is too good to be true, more than likely, it's not true. Really think about why the cost is so low.

[Ray]

Profit = Sale Price - Cost

Cost = Purchase Price + Repair Cost + Lenders Fees + Agents Fees + 1 to 2 months mortgage + tax

[Mr Practical]

Originally Posted by chbrules

I am 21, my brother 19. I have great credit and I suppose, if need be, I have my 335i as collateral? We're looking to get into a little investment situation here...

The situation is, there's an old husband and wife who are moving into some old folks place and they're offering their house of 40+ years as-is. It probably needs a good chunk of work, but it's in good condition, just old. My dad said they said their initial price is $490k. The average prices of homes in our niehgborhood are ~$600k+. If I'm able to get this place for about $475-480k, take out an equity loan, and do a good turn around in 1-2+ months after hard work my brother and I can make good profit. We know a lot of good, cheap contractors and we're handymen in our family. Not to mention we have a lot of friends and people that know about home renovation, including my parents; that's all they ever do with their homes.

Now here's the real situation, what are my options on a home loan? I have great credit (730+), about $1500-2000+ revolving credit, and I some good collateral (car (335i E92), expensive guitars ($3k+), and computers(lots and expensive)). I can't exactly put any down payment on the house, the $30k I have is going down on my 335i. I figure if I get an appraiser to show the bank the real value of the property versus the current value, it would be a win and collateral in itself for them to use for the loan. We're looking to do a 40 year loan just to keep the monthly payments low until we turn it around. Then after I sell the house I can pay off my car loan (in my parents name from their credit union) and have plenty of profit left over to put into my IRA for my own home purchase in the future.

Anyway, does anyone have any advice and/or suggestions? This is my first experience with this.

If you are expecting a quick flip in today's real estate market you are going to have to price that house similar to what you are paying for it (after fixing it up and paying all the transaction fees). The market is in a huge slump with massive inventory throughout the state. If you plan to buy this house, consider living in it if you have a hard time selling it.

[chbrules]

It's only 3 houses down from my parent's house, where I currently live at anyway.

I'm not going to use any real estate agents. 6% is way too much when I have plenty of contacts and marketing strategies. (Business major here ) What my dad suggested is ask the older couple, who we're pretty good friends with (neighbors), to be second trustees (I think it's called) and put about $100k into it for us so that afterwards we'll pay them back and only have to take out a ~$375k loan from the bank.

Yes, I definitely need to assess the situation to see what the extent of the refurbishing that needs to be done will cost. We know a guy that has some cheap, but good contractors, so I think that will help out a lot too. We plan to do a good deal of work on our own, landscaping, interior painting, renovation of the kitchen/bathrooms/bedrooms/etc. We're going to save a lot on labor.

We basically want to fix up the place enough so it's marketable to a younger couple. We've had a bunch of newlyweds move in around here. My next door neighbor just sold his place before it even went on the market for about $590k, which was severly under priced. His place is even smaller than the place we want to buy.