Deferring payments until rehab is complete and I move in?

Question

I am new to real estate, and am hoping someone with experience can help me. I am currently renting a house in Santa Rosa, CA. I want to buy a property in the Sacramento area and move there next summer. I want to buy a distressed property, and do a remodel, then live in the house for 2-3 years, and then sell it (kind of like a long term flip).

1) What would be the best way to do this? I've looked into 203k loans, but it seems like that might be a challenging way to buy a house since you need to have your contractor give you a bid for the work to be completed before the house is actually bought.

2) Should I purchase the distressed property, and then find a contractor, and get an additional loan to complete them work?

3) When I get my home loan, is it possible that the bank would let me defer the mortgage payments until the remodel is done, and I am living in the house? My thought here is to stay in my current rental until the remodel is complete, but I don't think I can afford to pay my rent ($2400/month) and the mortgage payment at the same time for several months while the work is being done.

If anyone has any experience doing this, please tell me how you did it!

Thank you to anyone that reaches out!!!! :)

Kyland Stevens · Answer

Thank you for your responses, much appreciated. I spoke to a mortgage broker yesterday and he said pretty much the same thing. David, I can afford to pay rent and a mortgage payment a the same time, I just saw at that option as a waste of money if there was a better play there.

David M. · Answer

@Kyland Stevens

Okay. Good luck.

Odie Ayaga · Answer

Hard money wouldn't be an option for you since you're planning on living there and also because of the timeline you have.

David M. · Answer

@Kyland Stevens

yeah, pretty much doing a 203k loan pretty much requires to you have everything ready upfront, and figure it out while the closing date is looming closer and closer...

How would you get an additional loan? Mortgages, by definition, are lending against the value of the property. The 203k loan option (its really just one loan) works because it assumes whatever money you spend on the house basically raises its value at least that much. That allows you to wrap the costs of the remodel into the loan amount. You still need to, however, qualify for that final loan amount.

No, you can't defer mortgage payments just because you aren't living there. Otherwise, everybody would be finding a way to skip their payments. Conforming loans will require owner occupations.. Yes, this is the "issue" with doing a house hack --- you have to live in your construction zone.

Sorry to be harsh, but if you can't afford to pay rent and carry the mortgage on another place, you need to either earn more money or not carry two places. Everybody wants to do real estate investing with very little money or income. Its tough to INVEST without any money. There are many sales pitches out there though....

You could try a hard money lender which is short term, interest only and required to be non-owner occupied. A hard money loan is sort of the "cousin" to the 203k reno loan except for the higher interest rate and occupied difference. But, its intended to be a short term loan and doesn't require having sufficient income to qualify since its about the deal. You are expected to sell (i.e. flip) or refinance into a conforming loan after you are done. So, that might work for you...

Good luck.

Deferring payments until rehab is complete and I move in?

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