CAN'T FIND REHAB FUNDS......HELP

Cleveland, OH · Member since 2018 · 50 posts · 18 votes

Hello everyone,

So far I have reached out to a few HMLs and have had zero success, I recently purchased a property cash in Cleveland, OH. Every time I speak with a HML they say the loan is too small. Take a look at the numbers below and let me know if anyone knows of a lender that would help me out on this. I am planning to BRRR this property. Thank you all!

Purchase price 10k

Rehab cost 30k

ARV 60k

Market rent 800

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Anna Buffkin

Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes

@Nicholas Reyes How about wholesaling it another investor for $15k and using the roughly $4k gain (assume $1k in closing and holding spent) to start saving on a down payment for your next project or paying down debt if that is what is holding your credit down?

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Matthew G.
Specialist · Pasadena, CA · Member since 2017 · 133 posts · 86 votes
7y
@Nicholas Reyes You may want to expand your search to private lenders. Most HMLs have at least a minimum of a 50k loan. The interest rate, points and risk just aren't worth it to a HML if they need to foreclose on the property even though you would be within their lending guidelines (75% ARV).
0 Reply
Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Nicholas Reyes have you tried a personal loan? Most lenders wont work with deals that small, so lines of credit will be your best bet
4 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
lenders cant make enough money on those tiny deals.. I do them but my minimum fee would be 5k no matter how small the loan is.. can run a lending company if you don't bring at least 4 to 5k in PER file..
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Nicholas Reyes
OP
Cleveland, OH · Member since 2018 · 50 posts · 18 votes
7y
Thank you all for the responses. I have looked into private lenders but have not had much luck finding a decent one. I understand it is a smaller loan I have to start somewhere haha. I will keep digging hopefully I will come out on top with the right answer to my situation. Thank you all!
2 Reply
Anna Buffkin
Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
7y
Why not just put it on credit cards or a personal loan? 9-12% no loan fees is not that bad.
When the property is rehabbed, call around to local banks and credit unions. I have done several small loans including a $48k loan on a $60k purchase last month with local credit unions. I have one credit union that lends up to $120k in house. They did a loan on a $30k condo for me 2 years ago.
2 Reply
Nicholas Reyes
OP
Cleveland, OH · Member since 2018 · 50 posts · 18 votes
7y
Hi Anna, my issue is credit worthiness. I'm mid 600's and did try for a personal loan over the summer for 30k with no luck. I dont think I could get that much on credit cards either. I am also going to see what else I can do to cut rehab costs down so maybe I can do them on CC's but the amount of work needed is making it difficult
0 Reply
Robert S.
Contractor · Milltown, NJ · Member since 2016 · 297 posts · 213 votes
7y
@Nicholas Reyes Perhaps DM @Jay Hinrichs He mentioned he does loans like this, and the interest rate would come out to approx. 16%. Not the end of the world, considering you would complete your first deal, and still come out ahead. I’m not a lender, however I would check with some of the lenders here on BP, to find out if you qualify for a refi upon completion of construction and seasoning period based on your current credit score. Since you plan to take on a loan to complete this project, it will impact your current score. It is better to know now if you will even qualify for your exit strategy. One strong part of this equation is that you paid cash, so outside of insurance, property taxes and utilities your float costs are minimal. Is it possible you can piece meal this project together over an extended period of time? Even do the bulk of the work yourself in time away from your current job? You can save up cash, hire a demolition team. Save up more cash, hire the framer. Save up more cash, hire the HVAC team. Save up more cash, hire the plumber. Save up more cash, hire the electrician. Would a plan like that fit into your goal with this project?
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Nicholas Reyes
OP
Cleveland, OH · Member since 2018 · 50 posts · 18 votes
7y
Thank you for your recommendation Robert, and your perspective. If I can't qualify for the refi then I would be in a tight spot, I will definitely look into that before I take a short term loan. Also I do have the ability to do some of the work myself but I feel it would take nearly a year to save up enough and work in my spare time, which isn't the end of the world but longer than I would like to complete it. But you have gotten the juices flowing, thank you for that, I have more to ponder about!
0 Reply
Robert S.
Contractor · Milltown, NJ · Member since 2016 · 297 posts · 213 votes
7y
@Nicholas Reyes Glad we could all help, solutions are out there, you need to find the one that best suits your needs. Best of luck.
0 Reply
Ryan Evans
Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
7y
Just for future reference, certain lenders will do preappraisals so you can know if your ARV is in the right range. If it checks out then you can go into the deal with a lot more confidence knowing you've got someone to finance out on the back end.
0 Reply
Grant Rothenburger
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
7y
@Nicholas Reyes Local PML's might be your best bet. Go to some networking events and tell people what you're looking for, someone will know someone. I help host a meetup in Cincy, we have 50 people usually and at least 3 of them lend money if the deal is right.
It may get expensive to fund this small deal but I'm sure you can find it! Good luck.
0 Reply
Craig Jeppesen
Rental Property Investor · Chubbuck, ID · Member since 2018 · 532 posts · 466 votes
7y
A few more possible ideas. Do you have a car you could sell? Could you get a second job for a few months and save like crazy to get started and then cash flow the rest? Do you know why your credit score is low? Sometimes paying off a small collection account can help a lot. Can you get a heloc? Do you have a 401k you could borrow from? Can you partner with someone?
1 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Nicholas Reyes:
Hello everyone,
So far I have reached out to a few HMLs and have had zero success, I recently purchased a property cash in Cleveland, OH. Every time I speak with a HML they say the loan is too small. Take a look at the numbers below and let me know if anyone knows of a lender that would help me out on this. I am planning to BRRR this property. Thank you all!
Purchase price 10k
Rehab cost 30k
ARV 60k
Market rent 800
I think you're numbers are off. Nobody is paying $60k for $800 rentals in Cleveland.
What's the address? I'll tell you what a more accurate ARV is.
1 Reply
Tom GrayPro Member
Rental Property Investor · Pittsburgh, PA · Member since 2016 · 18 posts · 12 votes
7y
@Nicholas Reyes Did you try peer to peer lending like prosper or lending tree? Sometimes credit card companies will offer personal loans with high interest but no origination or prepayment penalties for that amount. I used discover for a 30k personal loan for a rehab while I was waiting for a refinance on another property. It cost about $230 in interest and the money was deposited within 7 days with no paperwork. If you try this make sure you have money set aside for payments and you plan on paying it off quickly.
1 Reply
Jenna Lee
Rental Property Investor · Seattle, WA · Member since 2018 · 66 posts · 21 votes
7y
@James Wise James, is he cash flow in Cleveland better than????
0 Reply
Larry Rhodes
Flipper/Rehabber · Member since 2017 · 12 posts · 5 votes
7y
@Nicholas Reyes following. Best of luck
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Jenna Lee:
@James Wise James, is he cash flow in Cleveland better than????
Not sure I understand the question.
0 Reply
Jad Boudiab
Real Estate Broker · Cleveland, OH · Member since 2015 · 255 posts · 248 votes
7y
Many good points here. Like many have already stated, look into other HMLs that may help, never rely on one source of anything. Also as @James Wise mentioned, $800 for $60k doesn't sound too exciting in Cleveland.
When you're in a pinch, get creative. What about going to family for short term funding, or maybe taking on a partner and split profits?
The longer you sit on this, the more carrying costs you'll face, move fast. Good luck.
3 Reply
Anna Buffkin
Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
7y
@Nicholas Reyes How about wholesaling it another investor for $15k and using the roughly $4k gain (assume $1k in closing and holding spent) to start saving on a down payment for your next project or paying down debt if that is what is holding your credit down?
6 Reply
Matt P.
Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
7y
@Nicholas Reyes Ok man here is the reality, you need to sell this place. Your not in a position to do this. If you have a mid to low 600 credit score I doubt you can even refi this place. They will have requirements for an investment refi, for one you will need 6 months of mortgage payments in the bank for reserves. Say you could get a personal loan to rehab it, that would destroy your credit score and DTI and you for sure wouldn't be refinancing it. Take the poster aboves advice and wholesale it, get a few grand for your time and start again once you have a better foundation to invest. Sorry to be so harsh but your setting yourself up for a lot of frustration with this property. You can still make it a win by selling and getting out of this property with a couple grand in your pocket.
1 Reply
Nicholas Reyes
OP
Cleveland, OH · Member since 2018 · 50 posts · 18 votes
7y
Thank you all for the replies! I appreciate the input, good and bad. It's a business and I'm glad to receive great constructive criticism, I may have to sell and start over if the exit strategy will not work. I appreciate all the input and will use everyone's advice to make the final decision on this property. Thank you all once again!
0 Reply
Pamela Bunkley
Rental Property Investor · Houston, TX · Member since 2018 · 37 posts · 12 votes
7y
@Nicholas Reyes I have a few private lenders that might help. Send me a private message directly and I'll provide you with a few names, emails and numbers.
0 Reply
Dennis Pressey Jr
Specialist · Philadelphia, PA · Member since 2014 · 231 posts · 69 votes
7y
@Nicholas Reyes Private lenders are the way to go! Either way, I have some good info and lenders that’ll fund that deal in 3-5 days. Shoot me a message
2 Reply
James Canoy
Kingston, NY · Member since 2017 · 252 posts · 138 votes
7y
@Nicholas Reyes Take out a rehabilitation loan from a bank or credit union with the house as collateral. Once the house is fixed it’ll pay off the loan fairly quickly.
0 Reply
Jenna Lee
Rental Property Investor · Seattle, WA · Member since 2018 · 66 posts · 21 votes
7y
@James Wise sorry James I’ve been super tired and typing on phone doesn’t help...... I mean can u get $800 in rent for a property that’s less than 60k in Cleveland??
1 Reply

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