1st Buy, Rehab and Hold. Proper Way To Finance.

4 Replies

Hello, this is my 1st post on BP. I am planning to buy, rehab and hold my first property. I've found that BP seems to be the best forum, so that's why I'm here:)

I'm just going to level with you and let you know that I make a good amount (250k+).  I'd like to turn that in to wealth.  My wife is willing to help with being there for the daily rehab guidance and she's a great painter.  

I currently have a 401k with $70k+ in it and I have $80k in the bank.  I also have 2 houses w/ mortgages of approximately $1600/month (one is my current home and one is a rental that I bought new in 2007 w/ the hopes it would appreciate and start off my real estate empire! ha.)

I'm looking at a rehab that may go for $75k and maybe $30k in rehabs. ARV should be around $125k and have good cash flow.

What's the best way to do this?  Any other advice would be great.  Thanks for any help!

What I have done is find a bank that will do a loan to finance purchase and rehab, then refi out of that into conventional once rehab is completed.

Every state is a little bit different, but if you want to buy in your personal name you should be able to get 2 personal loans pretty easily depending on your debt to income ratio.  After the 4th mortgage it gets a little more difficult but is still possible to get conventional loans if you find the right loan officer will to do the work.  I don't know if your wife works but she may be eligible to get some loans in her name as well that way you could have a few in your individual name (not in both the names of husband and wife). 

Are your existing 2 loans in your name only?  or you and your wife's name?   

I don't know much about buying through your 401k.  it is possible, and it is possible for the 401k to get loans in its name.  There are ALOT of rules around so i decided not to pursue it.  Check with a CPA or some one knowledgeable about all the rules.

The husband/wife team has worked out great for us.  I've been surprised at how much my wife has stepped up not knowing much about rehab etc.  She has met with contractors, made payments, picked out color/tile etc, even pitched in on parts of the rehab we have done ourselves.  We are on our 4th one so we aren't experts but we are learning ALOT!

@Chris S.  

Since the flip will be in your personal name, you can't use your 401k funds for it. One option would be to take a personal loan from it, check with your plan administrator if you can do that.

Thanks Dmitriy, I actually used it to start my business a few years back and still owe around 10k on it.  I'll see what I'd have to do to make that work.  Thanks!

And Shawn Thom, I just made a call to a 203k and rehab lender to get some options.  Thanks!  Chris

Shawn presents a good option as well. If you want to explore 100% purchase and rehab funding with up to 70% ARV, I can assist you with that. It's a 9 month loan but you can refi into conventional once rehab is complete.

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