Physician Mortgage vs. Hard Money Loan for Major Renovation Project

[Janell E.]

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.