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Updated about 1 month ago on . Most recent reply

User Stats

34
Posts
25
Votes
Janell E.
  • Rental Property Investor
  • Saginaw, MI
25
Votes |
34
Posts

Physician Mortgage vs. Hard Money Loan for Major Renovation Project

Janell E.
  • Rental Property Investor
  • Saginaw, MI
Posted

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.

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