Bank Owned - options are cash or Rehab Loan

New to Real Estate · OR · Member since 2025 · 69 posts · 26 votes

Hi all,

I recently went to an open house in my area. I learned the options to purchase the house was cash or a rehab loan. What was explained to me was the bank will loan you up the listed amount which includes purchase & money for repairs.

For the rehab loans, is it temporary and are you then refinancing to a DSCR loan?

I am curious to know if anyone has purchased a bank owned house and how you made the deal successful. What was your experience? And what didn't you like? And what worked well?

Samantha

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Clayton Silva
Lender · CA · Member since 2018 · 638 posts · 393 votes
6mo
I do a lot of these, and there are some newer cool products hitting the market that allow a one time puchase+renovation that automatically rolls over to an investment loan like a DSCR so you don't have to do two separate loans.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
6mo
Yes, they can be very successful. Typically, get a short-term bridge loan or residential transition loan for fix and flipping that covers the majority of the acquisition and renovation. When that is completed, you can then get a DSCR loan.
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Matthew Bernal
Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes
6mo
Samantha, you've got the structure exactly right.

Rehab loans are short term typically 6-18 months. They cover the purchase and renovation in one loan with funds released in draws as work is completed. Once the property is renovated and rented you refinance into a DSCR loan which becomes your permanent long term financing. The DSCR loan qualifies on the rental income not your personal income which makes it a clean exit.

On bank-owned properties specifically they're absolutely fundable with the right rehab lender. A couple of things to watch: the bank's purchase contract usually has its own addendum with specific closing timelines, and the property needs to meet basic habitability standards at closing for most lenders. Get a thorough inspection before you commit.

This two-step structure rehab loan into DSCR refi is exactly what I specialize in. Happy to walk you through what it looks like on the specific property you toured.

What's the purchase price and what did the rehab estimate look like?
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