Houston, TX · Member since 2016 · 3 posts · 0 votes
I recently purchase a house with cash for $214K. ARV for the area is $380K. I am left with little cash to pay for the renovation cost. The house needs a lot of work to make it sell quickly and will need a loan for $100K. What types of lenders would be my best options?
Lender · Austin, TX (NMLS #1674054) · Member since 2016 · 108 posts · 50 votes
7y
Hi Chris!
You could do a delayed financing that would allow for the amount you purchased it for, minus the down payment requirements, to be given back to you (similar to a cash out refi). If it's been over 6 months since the purchase, you could just do a cash-out refi with the ARV value, minus the down payment requirement.
Hope this helps! Let me know if you'd like more details and I'd be happy to help!
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
7y
A home equity loan, private money, credit cards, or other renovation loans.
A hard money loan will run you 12% or higher, and 2 to 3 points...quite expensive, and in this way similar to a higher rate credit card with cash advance fees. Beware: as credit cards get higher, your debt to income ratio will increase, and a conventional mortgage will be harder to obtain.
Investor · Cumming, GA · Member since 2013 · 18 posts · 8 votes
7y
@Chris Marten
Use hard money. You probably could have used a lot less of your capital had you done that originally. People had to pay the cost but it’s nominal for most deals. Furthermore, you must have enough dry powder for unplanned for events.
Lender · Colorado Springs, CO · Member since 2018 · 241 posts · 97 votes
7y
@Chris Marten Chris, are you living in the house? Is the house titled in your name or an LLC? If you are not living in the house, a hard money loan should be easy to get and quick to close.
Lender · Charlotte, NC · Member since 2017 · 131 posts · 59 votes
7y
@Chris Marten Echoing what others have told you...If you are not living in it getting a hard money or private money loan will be easy.
I personally would pay the 12-14% someone mentioned above; however, they may not have access to the same capital partners. Either way, I'd recommend you take out a 50LTV loan as a refi complete the construction and stick to your exit.
If you can find a HML that will work with you even better, you could pay higher rate to buy down origination saving you upfront costs - pending timeline.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Chris Marten what was the original plan when you purchased the property? Seems odd to spend all of that money with no plan.... delayed financing or HELOC, and hope you don't lose too much on this deal.
Lender · Arlington, TX · Member since 2018 · 465 posts · 184 votes
7y
@Chris Marten
How long have you owned It? Delayed financing with a HML might be good option as others have said. Id say you could find something at 10 to 12% 2 to 3 points. You'll need an LLC to do that and it can't be primary residence.
Home equity loan may be hard to get on an invesment property that needs a bunch of work and has no rental cash flow.
Investor / Lender · Seattle, WA · Member since 2014 · 1k+ posts · 730 votes
7y
Since it's an ugly house and you want to get it done quickly, hard money seems to be the obvious choice here, assuming it's non-owner occupied. You can basically get most of your cash back from the purchase and use that for the renovations. Don't get a "rehab/construction loan" from a hard money lender (i.e. a loan held in a holdback account) because then you'll have to deal with draws, and they'll probably charge you interest on it anyway during the entire loan (most HMLs do).
Some lenders can still be picky about your current liquidity though, even if you've already spent it all in the property, and disqualify you for the loan based on that. So you may have to do some shopping around. But you have so much equity in this thing that I don't think it'd be difficult to find out. I don't think you'll have to pay double-digit interest rates for something like this, especially if you keep the LTV low. You don't necessarily need an LLC either; that depends more on the lender you choose (and sometimes the state the property is in).
Feel free to PM me if you want some specific recommendations.
Houston, TX · Member since 2016 · 3 posts · 0 votes
7y
Thank you all. I have owned the house for about 4 weeks now and it is not my primary residence. I know I can get a hard money loan, but I was hoping to use the value of the property as collateral to secure a cheaper loan.