Mortgages and Rehab Loans

5 Replies

Hello. My husband and I (this is Cassie speaking) recently located a small multifamily property that we are interested in as our first buy and hold rental. It is a duplex, and we believe it has positive cash flow potential (based on our analysis). We are already approved for a conventional 25% down loan on the property, but the property requires some TLC to increase the overall value and attract great tenants (the siding on the house needs to be redone to boost the curb appeal & there may or may not be some mold in the basement that will need clearing. We have not yet had the official inspection done on the property). 

Our realtor, who is also an investor on BP, suggests trying to find a loan that would include both the mortgage for the property and the cost of any rehab work all in one loan. When I asked one of the banks who we are pre-approved with (Guaranteed Rate), they said they only provide conventional loans like that for single-family investments. Our other banks are still trying to get back to us on this, so in the meantime, I would like to ask: 

Does anyone know of any banks that have conventional loans that can lump both the mortgage & rehab costs all in one loan?

I know there are other means of creative financing (e.g. hard money lenders). However, this is not our first choice. We are able to save up the money for rehab work if necessary (we both have well-paying jobs). The loan would simply help us not put more of "our" money into the property.

We are open to any other advice you are willing to give. 

Thank you,

Cassie Roche

@Len Roche

Hi Cassie, I know a local bank in Oswego that offer construction loans on primary residential houses - if you plan to move in. 

Unfortunately, not for investment properties.

PM me if you need a referral. 

What you are looking for is Fannie Mae's HomeStyle loan, which is a mortgage + reno loan for investment properties. Look for banks in your area that offer the HomeStyle loan. Not many of them do, but it does exactly what FHA's 203K loan does for owner-occupied properties, except it can also be used by investors.

@Len Roche I agree with @Patsy Waldron . The Fannie Mae Homestyle Renovation program is what you're looking for. It only requires a 15% downpayment from investors, however there's banks out there that have overlays and will require 20-25% down. Just shop around and you should be fine....

Fannie Mae HomeStyle only works for SFR investment properties. 2-4 unit FNMA HS is for owner occupants only.

My bank offered me 3% down, no PMI and I could take 20% of the sales price to use for rehab. Chase has a program similar. Search around, put less down, don't pay the PMI, have the other tenant paying your mortgage, save up your cash, and watch your equity build.

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