How to finance rehab for owned distressed property?

Question

I was gifted my grandparents old home and now own it outright but it is in disrepair. I have had a few contractors quote between $30-50k for the renovation. I am having trouble finding financing for this amount and was wondering what some ideas would be. As is value sits around $40k with an ARV of $140k. The low "as is" value has put off a few local credit unions. Most questions and answers on the forum I have seen involve financing the purchase of the property as well as the rehab, but I already own the property outright. I do not have the cash currently to pay for the rehab. Should I continue with local credit unions? Zero interest credit cards then finance traditionally on the ARV to pay off the credit cards? Or is there a creative solution I'm not seeing?

The home will be used as a rental. My parents have rented it out successfully for years but to lower quality tenants. I’d like to stabilize the property and attract a better tenant pool. I am located in Texas.

Thanks for all the responses!

The home will be used as a rental. My parents have rented it out successfully for years but to lower quality tenants. I’d like to stabilize the property and attract a better tenant pool. I am located in Texas.

Thanks for all the responses!

Chris Davidson · Answer

@Grady Dennis I would treat it like a BRRR but you get to drop the B and call it a GRRRR since it was gifted. Find a Hard money lender get the rehab completed, get it rented, then refinance. You can either pull cash out past your loan pay off or just enough to pay off the loan to better terms and have a really strong cashflow property.

Zero interest Credit cards can make it difficult as one wrong move and all the sudden the Hard money lender's terms seem amazing.

Gerardo Jasso III · Answer

Hey @Grady Dennis It's a bit harder to find a lender for rental properties since most loans are meant to help the purchase of the home, but if you go with a hard money lender, you might be able to offset the interest those have with just flipping the home instead and selling it instead of renting it out, and then use that money to purchase another property on a conventional loan to rent out instead, just some insight with some clients I've helped out in the Houston area, Wish you success!