Rental Property Investor · Saint Albans, VT · Member since 2015 · 76 posts · 5 votes
Hello all,
Found a property I am trying to find financing for. It is a foreclosure that needs a little rehabbing 5-10k. We might turn this into a fix and flip or just a buy and hold. I am trying to find the best way to go about the financing part of this.
This is a SFH, I have the money for 20-25% down. I currently have an FHA loan so I cant go that route. It does need like i said some rehab so i believe it would require a rehab loan. My question is my father who i will be partnering with is a GC, my brother an electrician. We are able and want to do all the work ourselves because it is not that much. Do we have any options for this? Or if we go the rehab loan which it will probably require do we have to have someone else do the work for us?
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Shane Brown If it's only $5-10k, you should just get a personal loan from your bank or credit union, or possibly just put it on a card if you can pay it off fairly quickly. I've never come across any banks that would lend that amount of rehab (as a mortgage) because it's just too small.
New England · Member since 2018 · 43 posts · 21 votes
7y
Is it a foreclosure sale, or being auctioned? Just asking because an auction could have additional cash requirements.
For financing, will there be significant equity after doing the needed repairs? If so, look at a commercial loan and see if they'll do an ARV appraisal and loan based on that.
Alternatively - hard money is an option if the numbers are solid and you set a defined plan as a fix & flip.
Saint Albans, VT · Member since 2016 · 7 posts · 3 votes
7y
We used Northfield Savings Bank for ours. They financed 80% of both the property and rehab budget. You could try them. Typically local banks like that are more receptive to things like this.
Similar deal - partnered with my in-laws, we did most of the work and were not required to hire a GC. We just had to submit receipts/invoices to get the rehab money from the bank. (side note - we gained a ton of travel miles by putting it all on credit cards and then paying card off with bank reimbursement).
Rental Property Investor · Saint Albans, VT · Member since 2015 · 76 posts · 5 votes
7y
@Tom S. problem is I believe it will need a rehab loan, or something of the sort. I don’t believe a bank would finance it conventionally.
@Keith Gilbert it is a foreclosure sale, I have thought about hard money but this being my possible first deal I’m leaning towards a bank loan just to get my feet wet and get a feel for everything.
New England · Member since 2018 · 43 posts · 21 votes
7y
Totally understand. And it's not a great option for a buy & hold.
If you go fix & flip, hard money is probably cheaper than a credit card for any given time period unless you get a new card with an introductory 0 rate.
Rental Property Investor · Saint Albans, VT · Member since 2015 · 76 posts · 5 votes
7y
@Josh Bondesen that sounds like what I am looking for. Are they a local bank here in Vermont? Thanks for the heads up!
@Keith Gilbert yeah we are not really sure which way we want to go with it yet. It’ll cash flow a good amount which would be good for me, but also increasing my capital real quick would be nice as well.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Shane Brown Gotcha, I didn't understand the place wouldn't qualify for conventional financing as is. Are you sure it's only $5-10k rehab? I've done a number of purchase + rehab loans with local banks in VT. However, the rehab was usually more in order to justify a higher ARV. For example, one I did was $50k purchase, $25k rehab, and the ARV was $110k. The bank lent both the purchase + rehab funds, with 25% down.
As mentioned above, Northfield Savings bank is a good local bank (I've called them before and got some quotes, but never did a deal with them). I've also used Chittenden Bank in the past but not sure if they're still around.
Rental Property Investor · Saint Albans, VT · Member since 2015 · 76 posts · 5 votes
7y
@Josh Bondesen cool i will give them a call tomorrow to see what they can do, thanks for the heads up.
@Tom S. I do not believe the rehab will be much more then 10k. Its basic stuff, flooring, paint unless something unforeseen comes up which is possible. But i will have to look into that bank hopefully they are able to help out in this situation.
Rental Property Investor · VT · Member since 2017 · 233 posts · 147 votes
7y
@Josh Bondesen was financing through NSB for a primary residence or investment purchase? When I spoke to NSB previously, they were very friendly but made it clear that it's against policy (they will not lend) when the money is going towards a "flip" type of property, and didn't seem to love the idea of foreclosures. They said they won't even lend to an independent buyer if the house has been recently purchased (I don't know what time frame) and is being re-sold at a noticably higher price, even if the buyer had nothing to do with the actual rehab/original purchase. It seemed a bit stringent to me, but banks want their interest money.
Rental Property Investor · Saint Albans, VT · Member since 2015 · 76 posts · 5 votes
7y
@Tom S. yes, we got preapprove for it, the interest rate was rather high though 6.25%. Made the numbers a little tougher to work with, but we wanted to offer a little less then the bank is asking for it. We were told that they already had offers coming in and the fit will probably go for 20,000 more then we were willing to offer. Not sure if it is a cash buyer scooping it up, but at that price it just won’t work for us.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
7y
@Shane Brown Yes, rates for investment properties are ticking up and I'm hearing 5.75 - 6.25% these days. My loans are commercial and adjustable, and pushing 6-7% now.
Certainly wishing you good luck out there and hopefully you find some good investments!