How to Finance

10 Replies

I have a property under contract at 33k, it needs 15k in repairs and the ARV is at least 80k.

What is the best way to finance the deal? 

A) Go with a hard money lender for acquisition and rehab, then find another bank to cash out refinance

B)Use a conventional bank for acquisition, a 2nd bank for a construction loan and a third bank to cash out refinance

Has anyone actually obtained a construction loan?

Any advice or direction will be appreciated. 

Thank You

You may have a difficult time finding a bank to finance a $33K acquisition and an even harder time finding one to finance a $15K construction loan. In the unlikely event that you do find such a small construction loan the fees and costs may make the hard money loan look like a bargain. You will need to put some of your own money into the deal to attract any lender.

@Lorenzo Jackson  I don't mean to be hard on you here, and it's great that you are rolling up your sleeves and getting into the dirt to play, but honestly this is a question that anyone and everyone should have answered for themselves long before getting into a contract on a property.

You might be able to get it bought and rehabbed with HM but you will get killed on fees of you can't refi with a bank and most things in the banking world, at least for a person starting out gaining financing for most things, well it's not a very speedy process and that can cause issues on it's own without adding the newbie factor to it.

I wish you luck man, I really do!! Let us know how it goes......

Hard money is great for rehab, but typically has a short term with points and fees if you need to renew.  If you are going to go that route, make sure you can get long-term financing once the property is rehabbed. If you can get a bank loan, that is a good solution.  If not, you may have to look into private money sources.

@Lorenzo Jackson you can do a cash out refinance when the property is in livable condition. Depending on how many mortgages you have already. Delayed financing is cashing out on mortgage 1-10 prior to 6 months and as long as the LTV supports it, you can cash out up to the purchase price and closing costs. Mortgage 1-4 you can cash out on after 6 months and this goes based on ARV.

Jerry Padilla, Lender in NY (#NMLS 1084877)
585-204-6923

@Jeff McCaskey  I did not mention I have a hard money approval in place already, for my last deal I used hard money and yes I was killed with a ton of fees. I also have the refinance in place as well. I am looking for a cheaper way for acquisition/rehab without paying massive HM fees. 

Big L,

Sounds like you have a decent plan going then. Good job!

So, I would say if you sit down and make a list of all the people you feel like you can approach using your phone book from your cell, your friends list from facebook if you have an account, or any other organization you belong to including family and you speak with all of those people you list and can't find any private money, then perhaps you will have to use a HM loan to do these deals and refi with a bank until you have built 1) enough cash to bypass the HM or 2) have enough equity/relationship with the bank to obtain an LOC.

I didn't have enough to flip in the beginning either so I used rental property to make equity and upon refi ing those properties bought on contract initially with a local bank I gained a large equity position in my properties that I used as an LOC to then enter the flipping market.

Hope that helps ya out buddy!

Jeff

@Lorenzo Jackson  

Maybe it's worth looking at @Bob Green. The lending minimums are higher than what you need to do this deal you're currently working on but might be worth looking into.

Go get em man!

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