Investor · Everywhere, USA · Member since 2016 · 69 posts · 19 votes
So.. Here's the situation.
I've found a property I would like to purchase
The bank won't loan on it because it needs some rehab
I would like to get a hard money loan to purchase it and fix it up
Then I would like to move into it and pay off the hard money loan with traditional financing.
I'm a newbie, especially to hard money, so help me understand... Is this possible with hard money? Most of the sites I have visited from BP's featured lenders page say explicitly that they will not loan on owner occupied homes. But "technically" it's not an owner occupied home right? At least during the course of the hard money loan.
Is this an issue? If so, are there ways around this issue?
Oh, and if anyone has any recommendations for hard money lenders that they've worked with in the past that would also be super helpful :) thanks a ton!
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
9y
@Justin Koopmans It's a complete no brainer for you to go the 203k route in this situation. You're lender doesn't like 203k because it is more work for him. Which I understand from his point of view, but you have to do what's best for you.
I would seek out a lender or broker that specializes in 203k loans in your area and work with them if your lender isn't willing to bend at all. I bet if you tell him that's what you want to do that he falls in line.
I have clients here in Connecticut that have had good success going the 203k route, but I highly recommend choosing an agent and lender that have experience closing 203k deals. Process will go much smoother.
Investor · Cameron Park, CA · Member since 2015 · 64 posts · 72 votes
9y
Justin,
Have you considered a 203k loan? These loans are specifically designed for what you want to do. Just google 203k loan and you will find lot's of local brokers who can help you with this.
I would also call a couple of your local hard money lenders and just tell them what you want to do. The advantage of a hard money lender is they can tell you if your numbers are accurate or if you are being realistic about everything. Yes, they are more expensive, but that's part of the cost of learning when you are first starting out.
Investor · Everywhere, USA · Member since 2016 · 69 posts · 19 votes
9y
@Robert T. So I have considered a 203k loan... My lender is not too enthusiastic about them and so we are going to try and see if the seller will pay for the fixes first, but we may need to go the 203k route.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
9y
@Justin Koopmans It's a complete no brainer for you to go the 203k route in this situation. You're lender doesn't like 203k because it is more work for him. Which I understand from his point of view, but you have to do what's best for you.
I would seek out a lender or broker that specializes in 203k loans in your area and work with them if your lender isn't willing to bend at all. I bet if you tell him that's what you want to do that he falls in line.
I have clients here in Connecticut that have had good success going the 203k route, but I highly recommend choosing an agent and lender that have experience closing 203k deals. Process will go much smoother.
If you think you landed a particularly good deal and using a 203k loan may weaken your offer too much, you can use a Hard Money Lender if the following is true:
1. You will not occupy the property during the term of the hard money loan.
2. You have enough cash to put a sizable payment down on the property. The down payment varies by lender, 100% financing is possible if the deal is good but can be more expensive than putting skin in the game.
3. You are able to refinance out when the time comes. Get a solid exit strategy.