150K needed to finish up Investment Home

Member since 2020 · 8 posts · 3 votes

I and my contractor friend invested in a foreclosed home. Knocked it down and got the framing, roofing, plumbing done. We will probably need another 150K to finish the house. Title is free and clear of liens, no mortgage and is in both of our names, not zn LLC. Contractor already has built over 3 new homes and is experienced.

What's the optimal way to get the desired cash to finish the home.

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Clark Peterson

Lender · Catskills / Hudson Valley / Greater NYC Metro · Member since 2023 · 24 posts · 11 votes

A construction loan is probably the way to go. Feel free to DM me if you'd like to go into detail.

There are generally four types of construction loans:

- Construction-to-perm: this loan finances construction of a home and then converts into a fixed rate mortgage once the home is completed.

- Construction-only: a short-term, adjustable-rate loan that is used to complete the construction and afterwards the loan must be paid in full or refinanced into a mortgage.

- Owner-Builder Loan: Draws are made to the owner-builder, rather than to an approved third-party contractor. These loans are usually only available to owners who can demonstrate experience as a homebuilder and/or have a contractor’s license.

- Renovation Loan: it's like traditional mortgage. Renovation loans cover the cost of purchasing a home and performing major renovations. Because of this, the loan amount is based on the anticipated value of the home after renovations.

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Clark Peterson
Lender · Catskills / Hudson Valley / Greater NYC Metro · Member since 2023 · 24 posts · 11 votes
3y
A construction loan is probably the way to go. Feel free to DM me if you'd like to go into detail.
There are generally four types of construction loans:
- Construction-to-perm: this loan finances construction of a home and then converts into a fixed rate mortgage once the home is completed.
- Construction-only: a short-term, adjustable-rate loan that is used to complete the construction and afterwards the loan must be paid in full or refinanced into a mortgage.
- Owner-Builder Loan: Draws are made to the owner-builder, rather than to an approved third-party contractor. These loans are usually only available to owners who can demonstrate experience as a homebuilder and/or have a contractor’s license.
- Renovation Loan: it's like traditional mortgage. Renovation loans cover the cost of purchasing a home and performing major renovations. Because of this, the loan amount is based on the anticipated value of the home after renovations.

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Caden Wakim
Flipper/Rehabber · IL · Member since 2021 · 100 posts · 49 votes
3y
I second @Clark Peterson!!!
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Saravanan Raju
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Member since 2020 · 8 posts · 3 votes
3y
Any referrals for Construction Only Loans or even Bridge Loans in or around Central NJ?
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
3y
Quote from @Saravanan Raju:

I and my contractor friend invested in a foreclosed home. Knocked it down and got the framing, roofing, plumbing done. We will probably need another 150K to finish the house. Title is free and clear of liens, no mortgage and is in both of our names, not zn LLC. Contractor already has built over 3 new homes and is experienced.
What's the optimal way to get the desired cash to finish the home.

Sounds like an ARV refinance loan could work. You can have your rehab 100% financed. (as a hold back) and cash out on the as is value.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Saravanan Raju
Could do private money if the equity is there, be quick and more expensive than traditional financing but if it’s for 6 months at $150k difference between a 7% and 14% loan is $5,000 in interest
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Clark Peterson
Lender · Catskills / Hudson Valley / Greater NYC Metro · Member since 2023 · 24 posts · 11 votes
3y
Quote from @Saravanan Raju:

Any referrals for Construction Only Loans or even Bridge Loans in or around Central NJ?
Yes. Happy to connect you. Feel free to DM. Thanks.
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Tarik Turner
Lender · Hackensack, NJ · Member since 2016 · 1k+ posts · 372 votes
3y
The other thing to consider here. If your friend's experience is as a contractor on those projects and not as an investor lenders may not count those projects towards required experience.
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