CASE STUDY OF GSMC’S INVESTOR REHAB LOAN

 (A Client’s Perspective)

Mr. and Mrs. Smith negotiated an earnest money contract on a single family residence for a sales price of $74,500.00.  The Smith’s were interested in a financing program that would allow them to not only purchase this investment property but also provide funds to complete some repairs of approximately $7,000.00.  They desired a loan that had a competitive rate to maintain a good, positive monthly cash flow.  Most importantly, the Smith’s required a loan with very little down payment or out of pocket expenses so that their cash on cash return would be maximized.  These goals were all accomplished utilizing Gulf States Mortgage’s Investor Rehab Loan Program.

The Smith’s application file was submitted to processing.  The Smith’s had credit scores in the high 600’s and had good income.  They anticipated the home to appraise for between $105,000 and $108,000 provided the repairs were done.  In this case, the house required some appliances, interior and exterior painting, minor trim work, carpet replacement and some landscaping.  The Smith’s chose to hire Granite Consulting Services, which is affiliated with Gulf States Mortgage, to act as the General Contractor for the repairs.  Granite’s program allowed the Smith’s to hire their own subcontractors and do some work themselves.  The appraisal came in at $105,900.00 subject to completion of repairs.

The approval process took about 30 days to complete.   The Smith’s were approved on both their interim loan and their permanent mortgage.  During this time, they acquired hazard insurance and a survey was prepared.  The Smith’s were ready to close on their interim loan of $83,839.00.   See the attached interim loan GFE for a breakdown of estimated closing costs.

In order to get this interim loan, it was necessary to get a pre-approved permanent mortgage commitment.   This permanent mortgage commitment would later be used to payoff the interim loan and roll in the final closing costs and prepaid escrows.

The Smith’s took a couple weeks to complete the repairs.  The repair funds were disbursed upon inspection on a draw basis.  Once this inspection was completed and a new title commitment was produced showing the Smith’s were now in title, the closing on the permanent loan was scheduled.  The new loan was set at $79,425.00 for the first lien and $10,800.00 for the second lien.  See the attached Permanent Financing GFE for a breakdown of the closing costs.

The Smith’s total cash outlay consisted of $500 for the earnest money and $475 for a credit report and appraisal fee.  Upon funding of the permanent loan and payoff of the interim loan, the Smith’s received a refund of their contingency reserve.  Their monthly positive cash flow is between $138 to $238 per month, which produces on the low side, a 169% cash on cash return on investment (ROI) in addition to the $15,675.00 in equity obtained.  From application to completion of repairs and final closing, the process took 45 days.

For a more detailed explanation of this program, please consider scheduling a meeting with Ray Hunt.  Ray will consider your goals and financial situation to best tailor this program to meet your needs.