So despite the two names I recognize most on this forum as RE experts telling me to walk away and wait, I'm going forward with the deal. I just want to acknowledge that I am being given good advice and not taking it.
One home is currently fully rented with combined rents of $875, the other is half rented and bringing in $450. All tenants are on month to month leases, no deposits, and landlord was paying utilities.
It turns out to be a small world, as one of my employees actually owns and rents out one of the homes across the street. She had looked into purchasing the homes but couldn't swing the full 9 home package. She has suggested she would have offered $55k ea for the homes I am picking up and probably paid more, done some minor renovations and sold for $90-95k. There is one home in the package that may still be available that is across the street from the two I am getting. It is the neighbor to the home coworker currently owns, both had previously been rentals that she inherited from her mother, and she is interested in taking it if possible.
I spoke with the local investment geared bank that everyone seems to use. They offer a 6 or 9 month investment loan at ~6.35%. I would borrow $75k for the price of both houses, with $105k available for renovations and 20% of the total due at closing. This can be in the form of cash or equity in another property. Interest only is paid and at the end of the renovation it can be refinanced into a longer loan with them or elsewhere. Interest only accrues on the renovation funds as they are accessed.
The interest rates seem high to me, but I'm used to retail owner occupied rates from early last year. I have the cash for the down payment, and could alternately setup Heloc's to cover the renovations and do them one at at time. I don't know that I would be able to do a cash out refi at the end of the renovations though, waiting to speak with my normal broker tomorrow. Path of least resistance sounds like the local bank for the reno. Any thoughts on the financing?