How can I finance this deal?

Question

So, I have 3 houses I bought for cash. They’re very inexpensive, like $30-55K each. One I co-own with my brother that’s rented(I’d prefer not to involve that one), of the others one is rented and one is being rehabbed. I’m under contract now to buy the fourth for $85K off market, which I don’t really have; I can swing about half. Obviously I don’t have time to go conventional financing since they want to close in about 3 weeks. Originally I was going to get hard money, rehab, and refinance although I’m thinking the cost of hard money is more than I prefer to pay. So, I’m thinking about finding a private lender to give me a loan based on the equity of 2 of the other houses. Then rehab and get delayed financing after a few months. I have some family members that may be open to that, but I’m not sure if their involvement would affect delayed financing since there’s stipulations as to where the money derives. I’m open to any and all ideas you have.

Matthew Crivelli · Answer

You might find that using a private lender is even more expensive than hard money. Why not purchase with a bridge loan and quickly refi out once the work is complete? There are options where you don't attach the rehab money to loan which in turn would cut the origination costs considerably.

Sam Bannister · Answer

Yeah I think a HELOC takes just as long and I don’t know if it will cover what I need for this one. Frankly I don’t know if they’ll do a heloc that small.

Annchen Knodt · Answer

Yes, i don't think you would be able to do DF on a house purchased with a private loan.  Though if you are already waiting a few months, you could just make it 6 and do a regular cash-out refi, and then you wouldn't be limited to just getting your upfront costs back.  Can see why you wouldn't want to wait though.  If you have equity in your primary residence though, you could also consider getting a HELOC and using that to purchase, since HELOC funds won't limit your ability to do DF.  Getting that set up may take too long though, so maybe the bridge loan suggested above is the way to go!

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Sam Bannister · Answer

I’ll look into that. Thanks!