Will a hard money lender fund a rehab only

Question

Hi BP members.

I just purchased a SF investment property in DC. My plan is to completely gut the house and have everything new - electrical, mechanical, etc. Will a hard money lender finance for rehab only? I know they typically lend for a 6 month period, so I plan to pay for all the drawings and permits myself since those can take a lot of time. Then once I have the required permits, I would like to use hard money to finance the rest of the renovation.

Cynthia Hartley · Answer

@Chris Eaker. BP is a forum for guidance, not one where people seek to be chastised. An experienced investor may have considered this from the beginning. However, since I am still learning as I go, it is not a question I thought to ask until now. I can pay for the reno on my own, but I want to consider my other options as well. Thanks for your input.

Darrin Carey · Answer

The typical hard money lender wants their mortgage in first position. If you paid cash for the property, then the answer is "yes". Otherwise, you'll have to get a hard money loan that pays off the first and provides enough funds for rehab. For the size of you project, I'd make sure you get a 9-12 month hard money loan. 6 months won't be long enough.

Chris Eaker · Answer

It's a little late to be thinking about this, don't you think? I assume you have a first mortgage or did you purchase it with cash? You may be able to find one who will do it. If they have to be in 2nd place, then you will have more trouble, and maybe they will want more points and higher interest rate. Is there anyone you could bring in as a partner to bring the money for the rehab for half the profit?

Nicole Graves · Answer

@Cynthia Hartley Congrats on getting started in real estate investing.  I understand your question.  I would agree with @Darrin Carey, as I recently had a deal where the owner was willing to do owner finance during the reno and I was looking to only have the rehab financed (to save money on fees, etc).  There were hard money companies that said "yes" however as Darrin stated they each wanted to make sure that they would have 1st position and that the owner owned the home free/clear. Otherwise I would need to take out enough funds for the purchase and rehab.  Wish you well and hope this helps!  Take care!

Cynthia Hartley · Answer

@Darrin Carey. Thank you for your response. You have answered my question fully.

Melsi Bifsha · Answer

Did you pay cash for the house ?

Get a loan on the house that you

Just bought and rehab the place.

Otherwise I agree with Chris get a partner

Good luck

Will a hard money lender fund a rehab only

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