We’re excited to announce that rehab is officially complete and our first family has moved in. We were actually able to move the family in prior to the finishing touches of rehab.
The family is from Afghanistan with three adult sons. The parents speak little English, but the sons are able to speak fairly well. The family was matched to our impact home through the help of Nationalities Services Center (NSC), one of our well established partners.
The family is settling nicely and getting oriented to the area. NSC will be working with them to find work and adjust to the local customs.
In other news, we’ve finally completed our rehab, including repairing a water main under the sidewalk. While the water main was a large repair, we were able to make the fix quickly.
Other minor repairs which were noticed after the major rehab was complete have also been taken care of at this point and the house is in excellent condition.
Remember back in the beginning when we mentioned that only a portion of the cash needed to purchase and rehab the property needs to be fundraised? Well that is because we use some special financing to get access to short term funds that allow us to purchase the property with cash. Now that the property is fully rehabbed and rented, we need to refinance the property by opening a mortgage.
Why get a mortgage now? If we had gotten a mortgage when we first purchased the property, then we would have been able to get a loan for 75-80% of the purchase price of the house. That means we would have had to put down 20-25% of the purchase price in cash as a down payment. Afterwards, however, we would have had to pay for all of the upgrades and repairs in cash.
The significant cost in repairs and upgrades, however, have now raised the value of the home by at least that amount. So when we refinance and open a mortgage on the property now, we will be able to get a loan for 75-80% of the new home value. This value is called the after repair value (or ARV) and is significantly higher than the initial purchase price of the property.
When we open the mortgage, the bank will give us cash for the value of the mortgage. And this cash will allow us to pay off the initial short term loan we opened to make a cash offer on the property.
Confused yet? If so, don’t worry about it. Just know that by waiting until now to get the mortgage, we will have saved about $30,000 for a fully refurbished house. And that savings gets us that much closer to the next impact home.