Types of Renovation Financing?

Question

Eli Gonzalez · Answer

Hey Chad, I was wondering the same thing. Looks like there are some good answers here. Also I just saw that Home Depot has something called The Home Depot Project Loan, It's something to look in too.

Chad Clanton · Answer

Thanks for the all the great info everyone, lots of options there. All that should keep me busy for a few weeks, and gives me quite a few options to choose from. Thanks for your time and all the great responses!

Bill Gulley · Answer

Yes, the 203K and other secondary market programs, where available are hard to do, many lenders don't want to fool with them.

Check out the USDA as well, where available as they have done purchase-improvement funding.

Small banks and credit unions are probably the best bet next to family. They can make commercial loans that make sense. You can pledge equity in other properties as well as the subject property. They will look closely at your experience and abilities, newbies probably won't get far without skin in the game but later on 100% can be had. Check out bridge financing.

Don't forget that you can delay closings and seller finance with a construction contract and protect your investment making repairs prior to closing.

Use lines of credit for materials from suppliers, they have cheap money.

Many subs will work for lower wages to get by until closing too and be paid then, make it sweeter for them. Partner as well.

Use other assets to finance. Some use credit cards, but I don't care for it. :)

Gregg C. · Answer

@Will B - Do you own the first rental free and clear? If not wondering how the bank got comfortable with using the first rental as collateral if there is already a senior loan on the home.  I have a couple of rental properties but they have mortgages against them so never considered the option that a local bank would loan against them.

@Chad C - I recently used a HELOC from a rental unit to obtain the funds for a flip I recently completed.  Assuming you own your primary residence or another property with equity this might be an option for you. Very cheap money.

Zach Schaar · Answer

@Chad C. Kind of going along with what everyone else said. I researched some of the options as well and it seems the best option if your credit is decent is to pursue a bank loan. There is so much red tape with homepath renovation mortgages and 203k's and I really understand what you're saying.

Between banks and hard money lenders (which would not be my first option), that's all I'm seeming to find.

Good luck in your search.

Chad Clanton · Answer

@Will Bradford  Thanks for your response. I appreciate the information and  will certainly pursue that and any other line that offers an additional option. That's my real reasoning behind my primary post, to try to get as many types of renovation loan options out there that I can, so that I have as much knowledge and flexibility as possible when I find something. Thanks again Will!

Will Bradford · Answer

Chad I cant answer specifically to your questions but I would say look at the small banks.  I just purchased my second rental using collateral and nothing down.  I was willing to put 10-15% cash down and larger banks wouldn't consider it.  I also have no debt and excellent credit.  It was a no brainer loan but they had their guidelines.

I went to a small local bank and they didnt ever request pay stubs.  They I could keep my cash and just use my other rental as collateral.

I know is isn't what your looking for but I did speak with them about flips and they were just as open to it.

Will

Chad Clanton · Answer

So, I'm somewhat familiar with 203K, and know that Fannie and Freddie have their own renovation loans; are there any other loan programs of note out there that are relatively "user friendly"?

Chad Clanton · Answer

Thanks Steve, appreciate it. I'll be looking into those.

Steve Babiak · Answer

Here are some possibilities.  Some banks will offer a construction loan.  And hard money lenders of course are an option.  Then you might also have private sources of money (like a rich relative).