carrying cost question?

[Jose Arreola]

Do I need the carrying cost in hand or does the loan pay for the month to month fees?

do i also need the rehab cost or does the loan pay for that as well? ro is there a seprate loan i get for the rehab?

I have enough for the 20% down payment on a house to flip, but thats all i have. this is why i ask if i need the cost of maintaining the house while i renovat?

[Kevin Luttrell]

The loan will generally not cover your monthly expenses during the project and you'll have to make monthly payments on the loan as well. Most fix and flip lenders will allow you to finance all or most of the rehab costs (depending on experience, ARV, etc). I know some banks out there will also finance in your monthly payments so your only out of pocket monthly expenses are utilities and general upkeep. Only one I know that does that is Temple View Capital.

[Caleb Brown]

I would go hard money. Typically it's 10% down and they cover the rehab. Each lender is different so connect with a few. Using conventional to flip would not be ideal

[Mike Klarman]

Yep, hard money is great for fix and flips. Most have a 90%/100% program. That's 90% toward purchase price and you get 100% of the rehab. They will require a minimum ROI on the deal which is usually 10 - 15%. There are even 100/100 programs out there now. You need to fit qualifications for experience, credit score, and show tax return though.

But yes, you will be paying the loan as you fix the house - that's your carrying cost. Some lenders will delay the first few payments and add them to the back end when you either refi or sell, but again lenders that do that also want to see certain qualifications and sometimes they lower the LTV of the loan.

Hit a homerun.

[Alex Breshears]

Like most things in real estate, the answer is going to be "it depends".

From a lender's perspective - there are a lot of ways to structure a deal. If your lender is requiring you to bring 20% of the purchase price and then you are responsible for the downpayment and renovations. If the loan has a loan to cost model - they may do a percentage of the total "cost" for the property. For example, if your purchase price was $100k and then the renovations are $30k, then the total cost is $130k. The lender may then lend a certain percentage of that total $130k.  Lastly, there is another model where a lender will lend on a certain percentage of the after repair value - so if you think the property will appraise for $180k, then they would 65% of that $180k which is $117k.

In most cases you will be responsible for the monthly interest only payments. Some true private lenders might be comfortable rolling the interest into the payoff of the loan if it is a short term loan. Hard money lenders are not likely able to do that because their terms are sort of in stone compared to private lenders lending out their own capital, which can be much more flexible in terms of rates, timeline, payment frequency, % borrowed etc.

[Andrew Garcia]

Hi @Jose Arreola, you can schedule the loan to cover the rehab costs. However, you will need to pay the carrying costs. You could put less money down with the right lender and use those funds only in case there is an overage or for carrying costs. 

Please let me know if you have any other questions or if I can be of any assistance.

[Basit Siddiqi]

Carrying costs include items such as 

Utilities(Electric, Water, Sewer, etc)
Interest
Insurance
Property Taxes

The longer the rehab is, the larger your carrying costs are.
Look at your loan agreement - Is it interest only or principal / interest?

Hardmoney lenders will not escrow items such as insurance / property taxes
Conventional lenders allow you to escrow the insurance / property taxes

Best of luck!