Financing Repair Costs

11 Replies

There's many ways you can finance the repair cost. 

-HELOC, if you own your home and have equity built up, tap into that.

-Borrow from 401k, pretty easy to set up and funding is about 7-10 business days. repay is directly from paycheck 

-If you own an asset of some sort that has value, you can look at getting a loan against it. take a look at your state laws

-Credit Card balance increase, can get expensive.

-Friends and family, borrow and pay back at 10% interest or you could give them equity stake in the property. 

There are a slew of ways but get creative and have fun with it. That's what makes real estate so much fun. 

@Noah McPherson

You could do an FHA 203k loan but you have to have qualified contractors do all the work.

Otherwise you could find a hard or private money lender in your area. Most of them will give you that cost but you will still need a down payment.

@Noah McPherson   401k loan is one of the easiest ways, as you're paying back yourself the interest and it shouldn't show on your credit.  But you have to be comfortable with that.

I used Sofi for a $50k personal loan last year.  Very easy to work with, no fees at all or prepayment penalties, they funded the whole thing within two business days.  Interest rate around 11%.  Discover Personal Loans offered me the same terms up to $35k.

Good luck!

@Noah McPherson do you currently own the property or are you trying to close on one that needs repairs?

If you own it, try to figure out a way to tap into your equity via a HELOC or refinance.

If you are trying to close on it, use a construction loan product and follow what @Brandon Plombon is saying. Say the property you want to BRRRR is $100K, rehab at $35K (will need a contractor quote), and closing at $5k so you are all in at $140k. Get an ARV appraisal prior to closing on the loan and the right bank will lend on 75% of the ARV value. Say the ARV appraisal comes at $200k. $200k*0.75 = $150k and you can fully fund the deal without any cash (because your all in cost is $140k). Even if this doesn't fully cover your downpayment (based on purchase price, rehab, and ARV appraisal) you can typically greatly reduce your cash to close on a value add project like this. Shoot me a note for more info!

@Sam Torvinen is right here. Using fix-n-flip money can be a great way to get into a project. There are some upfront costs but it can be a great strategy to elevate a property to a new level. Most lenders, mostly private money, will do something in the 80-90% LTPP and 100% of rehab.