Construction Loan? Hard Money loan? Other

[Socorro Temple]

Hello Everyone,

Last year, I purchased a property using a DSCR loan for a medium renovation. The existing home was 1,000 sqft. But we've decided it would be best to add a second level and build a new home. The home is located in Warwick NY

The situation: We have an existing loan on this property ($215K, appraised for $290K) and the construction renovation cost will be $310K to create practically a new home of 2,080 sqft. We currently have $150K from a HELOC from our primary residence and $60K from a 401K loan. So we have about $210K for the construction but are short $100K to begin the process.

The estimated value of the home, once completed would be between $675K - $750K

FYI, we also have an investment condo valued at $300K and a loan balance of $175 that has been fully rented for 4 years now.

Both my husband and I are W-2 employed with a combined income of $185K

We are not planning to flip the home. We want to rent the home for short or long term.

In this particular situation, what would be the best course of action to get the $100k that we are missing? The curveball is that we already started the demo and most of the existing home is gone.

I am trying to provide as much info, so feel free to ask anything else you think I might be missing.

Thank you for your help!

ST

[Chris Seveney]

@Socorro Temple

You could get hard money, but it is going to be very very expensive. Expected interest rates between 13 and 15% percent with points added

[Jay Hinrichs]

it too late now but never start a project like that without funding in place.. good luck. on it private HML is what you will end up with. Or just sell it to someone who has the capacity to finish it especially if you can make a few bucks.. regroup get your finances in order then do your deal.

[Robin Simon]

Quote from @Socorro Temple:

Hello Everyone,

Last year, I purchased a property using a DSCR loan for a medium renovation. The existing home was 1,000 sqft. But we've decided it would be best to add a second level and build a new home. The home is located in Warwick NY

The situation: We have an existing loan on this property ($215K, appraised for $290K) and the construction renovation cost will be $310K to create practically a new home of 2,080 sqft. We currently have $150K from a HELOC from our primary residence and $60K from a 401K loan. So we have about $210K for the construction but are short $100K to begin the process.

The estimated value of the home, once completed would be between $675K - $750K

FYI, we also have an investment condo valued at $300K and a loan balance of $175 that has been fully rented for 4 years now.

Both my husband and I are W-2 employed with a combined income of $185K

We are not planning to flip the home. We want to rent the home for short or long term.

In this particular situation, what would be the best course of action to get the $100k that we are missing? The curveball is that we already started the demo and most of the existing home is gone.

I am trying to provide as much info, so feel free to ask anything else you think I might be missing.

Thank you for your help!

ST

Other commentators are right here - hard money likely possible, but most hard money lenders really don't like funding a renovation mid-project - large preference or policy to only do one loan upfront covering the purchase/renovation fully planned out. Whats available - private money or HML will likely be very pricy.

One option could be to look at HELOC options on the investment condo - probably not going to get to the full $100k but could help. Also, how frugal can you be with the $185k W-2 income, could put X away towards the reno each month - it sounds like a longer-term project, so that could build up over time

[Jay Hinrichs]

Quote from @Robin Simon:

Quote from @Socorro Temple:

Hello Everyone,

Last year, I purchased a property using a DSCR loan for a medium renovation. The existing home was 1,000 sqft. But we've decided it would be best to add a second level and build a new home. The home is located in Warwick NY

The situation: We have an existing loan on this property ($215K, appraised for $290K) and the construction renovation cost will be $310K to create practically a new home of 2,080 sqft. We currently have $150K from a HELOC from our primary residence and $60K from a 401K loan. So we have about $210K for the construction but are short $100K to begin the process.

The estimated value of the home, once completed would be between $675K - $750K

FYI, we also have an investment condo valued at $300K and a loan balance of $175 that has been fully rented for 4 years now.

Both my husband and I are W-2 employed with a combined income of $185K

We are not planning to flip the home. We want to rent the home for short or long term.

In this particular situation, what would be the best course of action to get the $100k that we are missing? The curveball is that we already started the demo and most of the existing home is gone.

I am trying to provide as much info, so feel free to ask anything else you think I might be missing.

Thank you for your help!

ST

Other commentators are right here - hard money likely possible, but most hard money lenders really don't like funding a renovation mid-project - large preference or policy to only do one loan upfront covering the purchase/renovation fully planned out. Whats available - private money or HML will likely be very pricy.

One option could be to look at HELOC options on the investment condo - probably not going to get to the full $100k but could help. Also, how frugal can you be with the $185k W-2 income, could put X away towards the reno each month - it sounds like a longer-term project, so that could build up over time

Yup I would personally never lend on a job like this mid project.. you dont know if it was done right if all the vendors are paid etc..

[Jesse Holsapple]

I work at a direct lender that does short term mortgages in regards to exactly what you mentioned. 
The cumbersome aspect that you can expect here is that you've already begun demos and reconstruction, what that means on an appraisal is that you "might" have devalued the property from where you believe it is. The second portion being anyone who would refinance this and make the loan happen for you is also going to want a total project improvement budget which would include the amount you've spent already as mentioned above and be ready to show receipts and invoices. That being said, I'd be happy to chat about it further if you want to connect on this.

[Dallas Sauer]

Quote from @Socorro Temple:

Hello Everyone,

Last year, I purchased a property using a DSCR loan for a medium renovation. The existing home was 1,000 sqft. But we've decided it would be best to add a second level and build a new home. The home is located in Warwick NY

The situation: We have an existing loan on this property ($215K, appraised for $290K) and the construction renovation cost will be $310K to create practically a new home of 2,080 sqft. We currently have $150K from a HELOC from our primary residence and $60K from a 401K loan. So we have about $210K for the construction but are short $100K to begin the process.

The estimated value of the home, once completed would be between $675K - $750K

FYI, we also have an investment condo valued at $300K and a loan balance of $175 that has been fully rented for 4 years now.

Both my husband and I are W-2 employed with a combined income of $185K

We are not planning to flip the home. We want to rent the home for short or long term.

In this particular situation, what would be the best course of action to get the $100k that we are missing? The curveball is that we already started the demo and most of the existing home is gone.

I am trying to provide as much info, so feel free to ask anything else you think I might be missing.

Thank you for your help!

ST

 Was the as is appraisal done in the properties current condition? This is doable depending on your experience and the current state of the property. You also have another option of potentially a cash out refi on the condo depending on how the cash flow looks. Feel free to PM to discuss both in depth. 

[Jacob Sherman]

Do you have a prepay on the DSCR loan ?