NE Ohio money pit has us in a jam. Ideas please.
Hello. BP,
We’re scraping the bottom of the barrel to get this project to the finish line but are coming up short and I’m worried about what will happen when I apply for a cash-out loan. Let me give the scenario and I’d love to get some feedback....
In Jan my wife and I were the winning bidders on a house in North Canton, OH at auction for $64,000. The ARV was estimated at around $165,000 leaving us a total budget of $115,500 according to the 70% rule. Leaving $51,500 for the rehab. We'd saved up $32,000 and were planning to use HML to fund the rest of the project.
We'd planned on titling over the property into a LLC after everything was said and done to make refinancing on a traditional mortgage easier not realizing most HMLs only want to lend to corporate entities. As closing was drawing near and no funding was available, we tapped into our other business's coffers to complete the purchase in cash. This meant we were also on the hook for the entire rehab project for the most part. We then completed the title over into a LLC in the hopes we could still curry favor with HML with no luck.
Then, over the course of the last 5 months, the scope of the project grew to twice what we had estimated as everything that could need replacing did. This is a stark example of the importance of getting a thorough inspection! Everything including much of the framework had to go! To date the total project is nearly as much as the original ARV. We're tapped out and looking for small business lines of credit or personal loans to get us to the finish, but lenders are hesitant because of our moderately high DTI.
I'm resourcefulenough to scratch together the rest of the project money. My question for the forum is; are we going to have trouble refinancing the property if we're having trouble getting $15,000 small business loans now? Our adjusted ARV is closer to $225,000, all pure equity, because of all the necessary updates that needed to be made and we already have renters waiting to sign a lease for $1435 (+$45 pet fee) which is $250 more than our original rent estimate.
We’re in FL but I’m tempted to fly to OH and hit up every small bank and credit union in the area in person to plead our case. What are your suggestions? Any help would be great!
Aaron