Being your own contractor using a commercial line of credit
I have a question about being your own general contractor on an investment property. I am not a licensed contractor FYI.
I've secure a commercial line of credit with a local small bank, which is great, but the loan officer is impossible to get in touch with to answer questions and frankly is not that knowledgeable anyway. I have not found another local bank willing to provide the same financing so I guess I'm stuck with this guy.
So the plan is to buy a 2,3, or 4 unit physically distressed property with the credit, and use the credit to fiance the repairs, then refinance at the end of the repairs to a traditional loan and hold it for cash flow. If the after repair loan to value is 80% or less, then he is telling me that I do not have to put any cash down on the traditional loan, which is great. They are requiring me to have the 20% deposited in their bank before the commercial financing deal (because its my first one) so in the event it does not go as planned, they are protected. But if all goes well, I can have my 20% back to sink into the next one. There are quite a few opportunities in my area for this find, fix, and hold strategy.
I'm hoping someone has done this type of financing strategy before and can help me out with a few questions I have.
I would like to act as my own contractor and sub out the work. I have a great plumber, a/c guy, electrician, and roofer that I've worked with before on my personal property.
#1 What type of insurance is required? My loan officer said I will need general liability and builders risk. Is that all and/or correct?
#2 Am I even able to get builder risk without being a contractor myself?
#3 Is the added cost of insurance worth the saving on not using a general contractor?
Any advice or help would be appreciated. If I have not explained this fully or something sounds like its not possible, that would be nice to know as well.
Thanks in advance for any advice. I'm looking forward to moving from a talker to a doer when it come to REI and this place has been amazing for my education.
- Chris