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Private Lending & Conventional Mortgage Advice

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Tim Callahan
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  • Flipper/Rehabber
  • Dayton, ME
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How to raise $50k to finish a rehab?

Tim Callahan
Pro Member
  • Flipper/Rehabber
  • Dayton, ME
Posted Jun 6 2022, 05:41

Hey group,

I have a rehab property I'm working on here in Southern Maine. PP is $150k, rehab costs are about $75k, and ARV is $350k. We bought the house and are currently rehabbing it. Problem is, we only have about $175k total (no mortgages on the house, just cash), and need an additional $50k to finish the rehab. I can't take out a HELOC on my own home. We could find a hard money lender, but would have to make hefty payments on that for the next few months. Would it be appropriate to solicit an investor here on BP for a $50k investment, first position secured by the house, in exchange for a backend return (no monthly payments), payable around September, October of this year? If this post is not allowed, please delete. I'm just brainstorming. Thank you.

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Scott E.
  • Developer
  • Scottsdale, AZ
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Scott E.
  • Developer
  • Scottsdale, AZ
Replied Jun 6 2022, 06:55

If you have access to this money via a hard money lender, just use them. It'll be good to establish a relationship with a hard money lender anyway for future deals.

You say it'll be a hefty payment on that for the next few months? Even at 10%, your interest only payment on $50k assuming you borrow the entire $50k up front will only be about $417 per month. That's nothing on a deal with this much spread.

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Kevin Woodard
  • Lender
  • Nationwide
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Kevin Woodard
  • Lender
  • Nationwide
Replied Jun 6 2022, 07:20

I think a better way of looking at it would be: is the monthly cost more than I want to pay compared to the pay out in 3-6 months. Did you pay everything else out of pocket?

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Alvin Sylvain
  • Los Angeles
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Alvin Sylvain
  • Los Angeles
Replied Jun 6 2022, 16:25

I don't know your situation, but I've always considered that my keeping excellent credit would mean that it should never be difficult to get 10's of 1000's of dollars of near-instant credit using a regular credit line or a credit card. I know some people use the credit card as their first resort. It might be better as a last resort. I'm thinking, make your plans and try to have enough money to do what you know is going to be needed. But plans often go awry, "Stuff Happens," and it should be good to still have a nice fat credit card to fall back on in case of emergencies.

Also echoing what @Scott E. just said. If you have access to hard money, use it. Yes, hard money is expensive. I think that's why they call it "hard", coz if it was cheap, it would be "easy." But if that expensive money helps you complete the deal and sell at a profit, it's worth it.

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Kevin Luttrell
  • Lender
  • Orange County, CA
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Kevin Luttrell
  • Lender
  • Orange County, CA
Replied Jun 6 2022, 16:38

I second Alvin, for $50k I would look into personal loans. I was able to obtain an unsecured line of credit with Umpqua Bank a few years ago for $68k. Not sure if they still offer those but there are plenty of banks out there that have similar loan products. Just google unsecured line of credit. You'll have monthly payments, but they'll be very low. 

I would not seek out hard money financing for a small balance like this. Most hard money lenders have minimum loan amounts anyway and won't go this low, but even if they did the amount of points and fees you'd pay for it would be very high relative to the loan balance you're seeking. 

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Mike Klarman
  • Specialist
  • New Jersey
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Mike Klarman
  • Specialist
  • New Jersey
Replied Jun 7 2022, 11:11

You can do a delayed purchase.  Some Hard Money Lenders do them, we do.  So we do a loan like we are underwriting it from the beginning but you already own it. So you'll get a large portion of the purchase price back and rehab funds for items not completed yet.  This will give you the money to finish and then some. 

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Miranda Holland
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  • Lender
  • Cortland, NY
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Miranda Holland
Pro Member
  • Lender
  • Cortland, NY
Replied Jun 8 2022, 02:27

@Tim Callahan

You can save a lot of your personal cash by just using a Private lender for the whole deal. Lenders will do rehab only loans if the deal is profitable enough to give them confidence they're going to get paid. But using all of your cash reduces the strength of the deal from the lenders point of view. I would love to explain this in more detail and break down the numbers for you.

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Alex Talcott
  • Attorney
  • Durham, NH
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Alex Talcott
  • Attorney
  • Durham, NH
Replied Jun 8 2022, 02:33

I'm open to considering a deal myself.

You're welcome to message me and I can give you the email inbox to submit it to my team.

(P.S. I'm on the road right now with a team member from Kennebunk.)