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Updated about 1 month ago on . Most recent reply
Physician Mortgage vs. Hard Money Loan for Major Renovation Project
We found a home we love and see as the ideal place to raise our growing family. The property needs significant work. The current owner bought it for $420K via tax lien, and we’ve verbally agreed on a $470K purchase price.
Renovation costs are estimated at $180K–$220K (based on two contractor quotes, plus a 25% buffer), with an ARV of $800K–$900K.
The challenge is financing. We're low on liquid cash, with funds tied up in other investments (we own 24 units), and I prefer not to dip into retirement savings. I also want to avoid FHA or conventional rehab loans due to negative experiences I've heard.
I’m considering two options and would appreciate input:
1) Physician Mortgage Loan
- No down payment or PMI
- Requires AC and flooring to be installed before closing ($44K)
- Would ask the seller to cover these costs and adjust the price
- Drawback: flooring will likely need to be redone during renovation, creating inefficiencies
- Plan: fund the rest through personal loans and cash over 2–3 years
2) Hard Money Loan
- Finance both purchase and renovations up front
- Complete renovation in 6 months and enjoy the home fully
- Option to buy AS-IS with no additional work needed before closing
- Plan: refinance after renovations to pay off the HML
Let me know your thoughts or if there's a better route I’m overlooking.