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Jon Neumann
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Financing Question: Mixed Commercial-Residential

Jon Neumann
Posted Feb 5 2019, 11:20

I am in negotiations to purchase a ~$200 k property that I can afford to buy outright. The property will likely need a good $100k in rehab and renovations. I am currently considering two courses of action for financing the property: (1) enter into a traditional 25% down 15 year mortgage, keeping $150k freed up to put toward renovation; or (2) buy the property outright and use a Commercial Equity Line of credit to pull out money needed to fund renovations.

The property will be owned by my LLC with the bottom of the two story structure serving as a cafe space that I would help operate and the top being occupied by a residential tenant. Given these facts which of the two courses of action described above sounds like a better strategy for financing the rehab.