Can I get a loan for a property uninhabitable?

Question

Hello I found a property that needs 100k in repairs and was wondering if I could get a loan for an uninhabitable house or should I do sellers financing and finance the repairs?

Cody Mitchell · Answer

You can use seller financing, or you can use hard or private money. If the property is uninhabitable you won't be able to get conventional financing (through a bank) on it. If the deal is right you can use hard/ private money to finance the home purchase and some or all of the repairs, then do a cash out refinance to pay off your hard/private money.

Nick Belsky · Answer

@Angel Perez

Sounds like you are dealing with a C5 property.  Traditional lending doesn't lend on C5.  Your best bet is a Fix and Flip loan (HML).  There are lots of lenders out there who do these.  They are short term loans, usually 6-12 months, high rate, interest only payments.  They are designed to acquire, rehab, then get out of the loan quickly.  Exit strategies are typically, refinance into a long term loan and hold or sell it for profit.

Cheers!

Angel Perez · Answer

@Cody Mitchell Thank you so much!

Eliott Elias · Answer

If you can get seller financing do that, in every case. If not, hard money is probably your best bet

Juan Mateo · Answer

yes you can DM me to connect.

Tom S. · Answer

@Kayla Elliott  Hi Kayla - this was a commercial mortgage loan with a local bank, that held it "in house" after it was issued.  In other words, not resold to the government so the bank had more flexibility on the condition.

I look at the original commitment letter and it states "xxx amount will be advanced at closing for the purchase of an investment property, and the remaining balance of the loan to be placed into an escrow account to be disbursed as improvements are made".

No points, and only one closing, so I don't have to deal with a short term HML that I have to refinance in under a year.

Hope that helps!

Mike Klarman · Answer

There are lenders out there that will allow you to do a loan on something bought mid construction and is uninhabitable.  I can't give them away to you though!  Just kidding.  DM me and I can share.

Kayla Elliott · Answer

You were able to do that on an uninhabitable property? I am in the same situation as situation as the original poster, Angel. However, they won't lend since the property is already demoed and uninhabitable. Hard money rates are really high right now, plus the rates once I cash out refi are high making it seem like the only option for me, but with the rates on both ends, just doesn't seem to justify. What is the specific product you used, if you don't mind me asking?

Kayla Elliott · Answer

@Tom S.

You were able to do that on an uninhabitable property? I am in the same situation as situation as the original poster, Angel. However, they won't lend since the property is already demoed and uninhabitable. Hard money rates are really high right now, plus the rates once I cash out refi are high making it seem like the only option for me, but with the rates on both ends, just doesn't seem to justify. What is the specific product you used, if you don't mind me asking?

Tom S. · Answer

@Angel Perez  You should also check out smaller local banks and ask to speak to the commercial lending department.  I've done a few deals where the bank offered purchase + rehab funding up to 75% ARV, and then it converts automatically to a normal mortgage loan at the end of the rehab.  All in one closing so the costs are minimal.  I was last getting terms around 5-6% for the first 5 years, then floating with prime, 20 year term.  Quite a bit cheaper than HML.

Hope that helps and good luck!

Can I get a loan for a property uninhabitable?

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