Hard money loans for rehab on occupied property

9 Replies

I recently saw a property that was tenet occupied that I wanted to buy but I would also like to do a rehab on the place with the cost included in the hard money loan. I was just wondering if anyone has done this or any advice on this.

This is the bread and butter of large number of Hard Money Lenders. 

Conventional financing will be cheaper but if you don't qualify or need faster closing or otherwise want the flexibility of HMLs, then you will have a choice of such lenders.

Contact a couple, briefly tell them what you had in mind. I'm assuming you need a short term fix & flip loan.

Have the numbers handy like property current value, purchase price, rehab amount,  after repair value, your credit score, Property address etc..., make sure they can lend in your state (CA requires licensing, I'm assuming this where it is) and that they fit your requirements and you qualify for theirs.

Ask them about loan terms including interest rates, points, closing costs, appraisal fees, any up front fees or good faith deposits and loan duration. Briefly go over the lending process. Ask if the rehab draws are in advance or arrears. If it sounds workable fill out their loan form and they should send you a terms sheet to consider.

Looking at the HMLs listed here on Bigger Pockets for CA might be a good start.

Best wishes on your endeavors. 

@Ade Tuyo Assuming that your hard money lender would want to view the place before financing it, just make sure you will have the access to the home you need to make that happen. If the owner and/or tenant restricts access that could make things difficult for you. 

If the the room in the after repaired value for an experience flipper we would roll in the repairs for the rehab .

Originally posted by @Ade Tuyo :

I recently saw a property that was tenet occupied that I wanted to buy but I would also like to do a rehab on the place with the cost included in the hard money loan. I was just wondering if anyone has done this or any advice on this.

That type of loan is done all day long if you aren't going to move in after the repairs are completed.  If you want to complete the repairs with the current tenants living in the property, coordination, depending on the repairs, could get dicey.

Stephanie 

@Stephanie P.

Yea looking to buy and hold the property, it’s in Detroit. I can only see the property after I submit an offer. I wouldn’t want to be in the hard money loan long after closing I would want to rehab immediately and refinance out, so I see where getting in there could get dicey.

@Ade Tuyo Also you've checked the lease to make sure you can have the tenants move out? Even if it's 30 days notice, the high interest of the HML kicks in at closing, so the clock would be ticking.

I definitely wouldn't plan to be doing a major renovation with tenants in the property.  It's possible they could call code enforcement and stop the whole project.

Again, check the lease.

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