Lending options for fix and flip after purchasing property in cash

Akron, Ohio
Private Lending & Conventional Mortgage Advice
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Lending options for fix and flip after purchasing property in cash

John Huegel
Member since 2023 · 9 posts · 1 vote

Hello. I am looking for advice on financing of a fix and flip where the property is purchased in cash but I need money for renovations. Long story short, I won a sheriff sale auction back in February which is finally being processed. My hard money lender called yesterday and notified me they cannot finance the deal because the sheriff's office records the deed 14 days after they receive the money. Due to this I must purchase the home in cash and get financing to pay myself back and fund the renovations. I believe my options include the following but I am open to suggestions.

1. Continue to work with hard money lender. They will finance the deal after the property is purchased in cash.

2. Home equity loan or HELOC on the flip property. Issues with this might include not being a primary residence and/or the length of time it has been owned by me.

3. Home equity loan or HELOC on my primary residence. My current rate is 2.99% so I would probably avoid a cash-out refi as current rates are much higher.

Which of these options, in general, would cost the least to finance?

Thanks!

John

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  • Billy Daniel
    Rental Property Investor · Russellville, AR · Member since 2014 · 688 posts · 509 votes
    3y

    Check out a commercial loan. You can finance repairs up to 80% (lender-specific) of the ARV. The interest rate is a little higher, but they're easy to get and if you're flipping anyway that wont matter much.

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  • Tom Flann
    Investor · Spokane, WA · Member since 2008 · 22 posts · 4 votes
    3y

    Another option is delayed financing - allowing you to finance the property based on sales price and repairs after purchasing with cash. It's not treated as a refinance, but more as a purchase, so the rate can be a little bit better.

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  • John Huegel
    OP
    Member since 2023 · 9 posts · 1 vote
    3y
    Thanks guys. I am not finding any commercial loans for residential properties. Also all the delayed financing options I have seen do not include funds for rehab.
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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    3y

    What is your net income, FICO, property location, value as is, condition as is?

    Using your existing HELOC is the cheapest.

    Probably cannot get an investment HELOC on the subject, it needs to be turn key which an auction is not- condition might not work and title might not be perfectly clear.

    Delayed financing as someone suggested is FULL DOC as is property not ARV. Full novel of information to qualify. Title policy has to be fully clear of child support/utility/federal/tax... some liens do not get wiped by the auction. This is vital to know.

    I would not put 100% trust in existing hard money lender- they should have been able to tell you from the first phone call that they can't fund at auction sale - you need a firm backup in writing commitment.

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y

    Sounds like a delayed finance deal, 

    Does the property need significant work? If so, 

    You could purchase the property in cash and refinance into an ARV loan. You may finance up to 70% of the ARV which includes the rehab budget and purchase price.

    If the property does not need a lot of work, you may do a delayed finance on a DSCR loan. The max LTV is 75% of the purchase price.

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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  • John Huegel
    OP
    Member since 2023 · 9 posts · 1 vote
    3y

    Thanks Caroline. I may be at the mercy of the existing hard money lender as all others won't touch this deal due to being "rural." And all liens were wiped out.

    Thanks Erik. Yes it needs a ton of work. 

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  • Steffen Cushing
    Lender · Franklin, TN · Member since 2022 · 33 posts · 8 votes
    3y

    some HELOCs can be put on investment properties, some dont even require an appraisal if there is good market data and the amount that you are looking to get. 

    is the house a complete fixer? because delayed financing is a good option in which someone mentioned. This can be done DSCR or even conventional.

    also there are other hard money lenders and fix and flip lenders out there that might be able to get the deal done. 

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  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    3y

    LTV, loan amounts, etc. will vary by lender but you can possibly fund the acquisition + rehab with a fix and flip loan. If you plan to sell after it's rehabbed, you'd need to do that before the balloon comes due. If you decided to hold, once it's renovated you can rent it out and then refinance into a DSCR loan, pay off the fix and flip with those funds. HELOC on your primary is another good option, use those funds and then pay back after the property is sold. Happy to chat if you'd like to connect.

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
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  • John Huegel
    OP
    Member since 2023 · 9 posts · 1 vote
    3y

    Thanks everyone. I spoke to my initial lender last night and they are willing to finance the deal after the deed is recorded. I need to pay for the property in cash, wait 14 days to record, then they will reimburse me the purchase price and provide renovation funds. I am still reviewing my options though as I might be able to find a better deal with my new scenario.

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  • John Alan ReesePro Member
    Investor · OH · Member since 2020 · 1 post · 0 votes
    3y

    Who is your lender? Any chance of them working with me?

    I am almost in the same situation. I need to finance a renovation after buying cash. The renovation has already started, but I need a line of credit to keep going and finish the reno. 

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