Financing for repairs

10 Replies

I want to put the house I'm living in up for rent. It needs repairs that I can't afford. Any suggestions on financing. Mortgage is underwater. I can do a lot of the work myself but I need materials.

Lowes and Home Depot has the 0% for so many month deals if you get their credit card.

@David Hobbs  what are you trying to accomplish exactly? You're going to go further into debt making repairs in order to rent a house that isn't worth what you owe on it? I don't see how this story ends positively. Let us know some more details. 

I would like to keep it until it does appreciate to an equity point.  I thought renting it out would be the best way to do that and get started in the rental market. It is a 1957 Brick 4/2. Three BR downstairs and upstairs (walk up attic) finished into a mother-in-law suite. But most of the flooring, trim and wall coverings (especially upstairs) is very outdated. Also needs back door replaced and some widow panes are broken in the detached garage. I've got the mortgage at 3.75% (1350/mo) and should be able to rent for 1800 if it is spruced up. And you're right. I really don't want to get into more debt. It's definitely a quandary.

A rate of 3.75% is great.. But that seems like a "recent" rate. What is the home worth and how much do you owe? Is the home inhabitable but simply outdated? Where are you going to go live? Could you stay in the house and get roommates?

A question I would have is: what do you expect to cash flow if you were to accomplish the fix, and how would that cash flow contribute to your living situation? 

There seems to be an element missing here. Is there a reason that you need to move which prevents you from continuing to live in the house and seeking roommates as Mark Gallagher suggested above.

If I were single and starting from a property underwater that could generate significant positive cash flow, I'd live in a tinyhouse or some other similar meager living for awhile to pay off consumer debt, pay the repairs off and build up sufficient reserves to support the house. 

Let us know if there are any other details. 

There are lots of details..Highlights

Bought the house in 2007 - divorced in 2010. I was living on my own renting rooms and still paying mortgage per decree. Ex moved out and I took over sole ownership of the house. Now my teen daughter lives with me. Biggest issue is with the change in situation my monthly bills are beyond my current means. I have thought about renting out rooms but with a teen daughter it's tricky. Don't want to rent to guys and I don't think its likely that I'll get women renters.

So I take it that your current strategy is looking to make the needed repairs, rent the property ASAP to start generating cash flow and then live in a 2 BR apartment or some similar minimal living arrangement for you and your daughter? 

Unless rents are extremely low in apartments in an area you'd be comfortable renting in with a teenage daughter, you may end up in a tighter situation than you're currently in when considering repairs, moving costs/stress, potential for future repairs with tenant in place, and liquidity to get a tenant in place.

This could definitely be a time for creative solutions like taking a withdraw of principal from a ROTH IRA, or good old-fashioned elbow grease with a second job or freelance work for extra liquidity to get you to a more stable arrangement for you and your daughter.

From one father to another, you will find the way to make things work and take care of business: it's what we do.

@David Hobbs  if you're 10s of thousands (100s?) underwater, I would think nothing is going to make sense. 

A quick search shows me that apartments in Chesapeake, VA are going for roughly $1100 for a "nice" 2 bedroom. That's $3,000 a year difference, excluding a slight deduction for interest paid on your mortgage. So perhaps $2,600. You could easily make that in a small part-time job 5-10 hours per week. In other words, the savings moving to an apartment would be very slim.

If you truly can't swing anywhere near $1350 a month, the next step depends on how far underwater you are, in my opinion. 

Mortgage is at 237k. Comps on newer houses in my area are running around 210. ARV for mine would probably be around 200 at this point, but that's up from 175 about 3 years ago. I want to make the smartest decision. I really appreciate the input from everyone. It has definitely given me some different perspectives.

@David Hobbs  so as-is your house is worth about $175K? At max, all fixed up, $210K? And you owe $237K? Correct? 

So you're going to spend ~$5-10K (that you don't have) on repairs. At which time, you'd still be in the hole at LEAST $27K. 

What is the monthly payment that you can afford to pay for rent? 

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