Conventional loan plus private money ??

Question

Would it be a good idea if I would to purchase a Home under a conventional loan and seek out a private money lender to help fund the Rehab cost ?? Has anybody else used this strategy ? Or is there a better strategy for somebody wanting to get into the fix-n-flip business ?

Fred Shatzoff · Answer

@Jesse Barahona  You usually use one or the other not both.  Most flipper use hard money.

Jerry Padilla · Answer

@Jesse Barahona

If you are purchasing a property that needs renovating it may not qualify for traditional conventional financing.

You can use a conventional renovation loan if you have 4 or less properties including subject. HomeStyle is one of the options out there. HomeStyle is limited to just a SFR for an investment property, but there are other renovation products out there if you are wanting to do a MFR.

Here is some info on the product:

Product Overview

• Combines home purchase or refinance (limited cash out) with home improvement financing in one loan with one closing
• Provides a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 75% of the "as-completed" appraised value of the property with a first mortgage, rather than a second mortgage, HELOC, or other more costly financing method.
• Funds can be used for repairs or renovations that are permanently affixed and add value to the property.

Bill Plymouth · Answer

Hard money is expensive.  The rates in my market are 12-17%.  You can usually get private money for around 6-10%.  The only issue with private money is that you need to know or find someone with the capital to front your project.

If you use private money, make sure they get taken care of before you do regardless of outcome.  This will allow you to borrow from them in the future even if you’re deal goes sour.

Conventional loan plus private money ??

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