Hey everyone. My wife and I bought our first home almost a year ago. We bought it with the intention of turning it in to a long term rental. We underestimated the rehab costs as once we got in to the remodel, we found more that needed to be fixed such as, no insulation, have to update the wiring, mold removal, kitchen remodel, and so on. We are running out of funds and need to get it finished so that we can rent it out and start seeing a return. I have spoken to a few credit unions about a stand alone HELOC as a cashout refi isn't an option. My credit has taken a hit with all of the new debt and I would refi in to a higher rate than what I have currently 2.99%. A couple of the credit unions require appraisals. With the house in the condition its in, I feel like it won't appraise for high enough to pull out what we need to finish. Any suggestions on how to go about this?
Collin in Reno, NV
I know its too late now, but did you get an inspection on this property before you purchased it? If not, please speak to what you would do differently during the due diligence period so others can learn from your experience.
Are you doing these rehab items yourself? That will definitely save money versus hiring someone. Also, make sure your rehab level is appropriate for other rentals in your area. For example, if most rentals have basic countertops, then you shouldn't be putting in quartz countertops. Make sure the money you're putting into the rehab isn't wasted! If you and your wife want the high end finishes, but the neighborhood doesn't support that level of repairs, then you could probably use that money better somewhere else.
Regarding your funding issue, I would continue to improve your credit so you can get a HELOC, make your house functional and livable for future renters, and just do as much work as you can. Do you have friends or family you can get a low interest loan from?
@Collin Black I am going through a similar situation. I found a signature loan through 5/3 bank at 7.5% interest rate for 5 years. It was a Simple process and got the money quick. If your credit is an issue, you might have to pay a higher rate. Around my area, I also heard credit unions are good at loaning signature loans.
hope this helps,
There was an inspection do on the home from a previous contract that fell through. We took a look at it and were not worried. However, it did not mention a few of the bigger ticket items. I am able to do most of the work and have help from friends who are in the trades, so I am saving money there. The biggest expense is going to be the landscaping from what I can tell. We aren't going to be using high end finishes. This house has been like peeling back layers of an onion though. Every time we do some demo work to fix something, there is more behind it. I'm not really comfortable asking friends or family for money. That's why I'm looking at doing the HELOC. My credit isn't bad, sub 700. Just not where it was when we bought the house.
Calling around, I found a local credit union that will do the HELOC and said that they should be able to get a rate of 3.25%, but it's an interest only loan and I pay what I want towards the principle for 25 years. They do an AVM to determine the value of the home. That negates one of my fears of needing to get an appraisal. Is 5/3 BANK local to your area?
5/3 is not small (multiple states in Midwest, south, and east coast) but it’s not a national bank.
Thank you for the response Zack. I appreciate the input gentlemen.