Need help. Have a 2 bed 1 bath fixer upper. 40,000 will buy, less than 15,000 to rehab. 2 bed 1 bath in my area rent for $650 easily. Arv estimated at $80,000, possible sell to Investor for $70,000, once competed and renter in place. I need guidance on securing financing.
Hi Scott, you’ve got some options but we need to know more about your situation.
What’s your overall financial situation? Do you have a downpayment saved up 20% = $10,000. If not, how much do you have? Do you already own a home? Can you pull equity from that to buy it or come up with the down payment?
If you owner occupy the initially you can do a 203k or bridge loan and get the $15,000 for repairs right on the loan. If not owner occupying try talking to a couple local credit union sometimes they’ll do Reno loans but they typically want a 20% down payment.
Have you asked the seller if they’d be willing to finance you the downpayment?
How’d you find the deal? If working with an agent you can ask them if they know any investors that could be interested in partnering up on a deal like this. If not then try to find a real estate meetup and talk to some folks just make sure to be over prepared with numbers and comps for the property.
Hard money should be your last option since interest rates are pretty high.
Yes I could do 20% down, but it would be non owner occupied, I found the deal looking through different real estate websites.
I keep hitting a dead end on conventional loan because of the amount, most that I have found won't look at less than 50,000. Its a bank owned forclosure, and I can't get past "you'll have to apply for the mortgage"
Not enough equity in my current home, as we just purchased it last September.
Thank you for your response.
Based on this new info I'd say Talk to a local credit union with a strong commercial lending arm. See if you can take out a commercial loan for $55,000 on the property. Try to find one that lends based on Loan To Value (LTV) Instead if the traditional Cost To Value (CTV) the difference is key in this scenario. You want them working the loan off the $80k ARV not the $40k listing price.
Tell them You’ll use the $15,000 for repairs and write that into your offer. Which would read purchase price of $55,000 with $15,000 credit at closing to be used for repairs. This cash back is ILLEGAL on most residential loans but will fly on a commercial loan. Just make sure you disclose it to the bank.
I’m 90% sure this will work. I did this on a larger property but it’s the same concept. If this doesn’t work call up a couple mobile home parks and ask them who does their lending. They always have issues with the “micro mortgages” but when they find a lender they hold onto them. And chances are if you find someone that will lend on a $35,000 mobile home they’ll also lend on a $40,000 house.