Trouble with getting Financing for Rehab project-Advice Needed

2 Replies

I am in need of some serious direction.  I have several properties I hold as rentals, that have been owned long enough now that they are completely paid for.  I have done many rehab projects over the years but it has been several years since I have done a full house rehab (4 or 5?) I stepped away from my real estate goals years ago when my son was killed in an auto accident, and suffice to say that recently I made the decision to get back in the game doing what I love.  I own a liquor store, and the commercial property it operates in as well.  I have a masters degree in accounting and operate a tax prep and tax resolution (I am an Enrolled Agent) office as well.  I also work for Intuit during tax seasons and am an adjunct accounting instructor for Ivy Tech.  I say this to say I am fairly smart with numbers.  I recently started looking for distressed properties to rehab and lost out on several deals because i just wasnt fast enough.  So when i discovered a distressed property just a few blocks from my house I jumped on it, and purchased it outright for cash from a wholesaler.  There was no sign, and the bushes were so overgrown the house was almost unnoticeable...and it sits on the main road through our small town, just 2 blocks from my commercial building.  I think this is a major part of why it didnt sell quickly.  Now that I own it, i have started looking for money to complete the rehab.  I paid $17500 for the house.  It is a 4 bedroom, 2500 square foot, 1 1/2 bath home one block from the school.  I plan to convert an upstairs large closet into a bathroom, opening it up to the newly created master suite, making it a 2 1/2 bath home.  Originally, my rehab budget was about $63000 which included roof, siding, total redo on the inside, new furnace, air, and duct work (currently has old boiler system and no duct work) 

I had several companies say they wont do loans for less than $75000, so i increased my budget, opting for higher end counters, etc... The next round of companies then said the cost of the house in relation to the cost of the rehab was out of scope for them.  I have about $14000 additional  cash to begin the rehab but that wont get me far as the furnace/air/duct work alone will cost $11000.  I can make choices based on a smaller or larger rehab budget but it seems that neither approach has yielded any luck as I have also approached a few companies with less lofty rehab goals and been told they dont do loans that small.  

At this point I am unsure of what to do. I am starting the rehab with what cash I have, getting the ductwork portion completed, the roof and outside repairs completed, etc. while I continue my quest for additional cash. This house should have an ARV of at least $130000.

What am I missing?  Any advice and direction will be greatly appreciated...

Thank you,

Tammy

If you have a tax company and real estate that is paid off, you should have no problems getting an unsecured line of credit. I would go to the bank or credit union where I have all of my accounts. You may have to put up one of the properties as collateral for the line of credit. You may be able to refinance one of the properties to pull out cash.

After some of the repairs are completed you may be able to borrow against the property that you just bought. It will have clear title, new furnace, new roof, new lots of stuff. 

You could also pour all cash that you make into the property so that it will be all paid for when you finish it. You may need to open a credit card or two to finish it up. Just pay them off as quick as possible.

ALSO, you could tell friends and family what you are doing and maybe someone will ask if you need some help. Tell them, "Why yes, I could use a small loan to finish up the project. Do you know someone who has 25k?"