Finacing Options? Fix and Hold

6 Replies

For my first rental I bought an A+ condition property and only had to put 3k in it to rent. It was a good deal and I am happy with the purchase, however I want a BETTER deal the second time around

As you know, many posters on this site buy distressed properties fix and hold because the discount is better. This is what I want to do, but I have some questions...

1. What type of loan would work best on a fix and hold investment property? Lets say a property that I need to put 20-30k into it. I was reading about 203K loans until I realized that it is only for owner occupants. The reason I ask is because I do not want to put my own money into a sizable renovation.

2. What are some key considerations and differences that I have to account for using this type of strategy?

Hi Rob,

We were Just at the Distressed Note and Seller financing convention last weekend. The new theme there was:

Buy Distressed homes and resell at a premium with seller financing. A properly created note can then be sold or kept as mail box money. Let the new buyer do the rehab and thereby create LTV thru the buyers sweat equity and investment of fixing up the property.

@Terry Lewis   while this seems like a great option, it is way over my head.  I'm more in the simple buy, fix, hold style.

Is there a loan that works like a 203k loan for investors?

Originally posted by @Rob Randle:

For my first rental I bought an A+ condition property and only had to put 3k in it to rent. It was a good deal and I am happy with the purchase, however I want a BETTER deal the second time around

As you know, many posters on this site buy distressed properties fix and hold because the discount is better. This is what I want to do, but I have some questions...

1. What type of loan would work best on a fix and hold investment property? Lets say a property that I need to put 20-30k into it. I was reading about 203K loans until I realized that it is only for owner occupants. The reason I ask is because I do not want to put my own money into a sizable renovation.

2. What are some key considerations and differences that I have to account for using this type of strategy?

Hey Rob - this is a great approach to accumulating rentals.  I have been doing this for a few years now and work with a local hard money lender to acquire and renovate the properties, then refinance with a commercial lender (all multifamily properties) once rehab is completed.

The key is to find the right people to borrow from.  You're almost always going to have to put some skin in the game, but many hard money lenders will put up a good chunk of the reno costs as well.

Hi Rob with all due respect I can't imagine anything more complicated and risky than buying a fixer and borrowing money from a hard money lender or even worst spending time trying to get a 203k loan. You were very successful on your first deal because you did not need to fix it up and the value was created from your good purchase price.

Terry

Terry, the one major drawback that I see in this approach is that it assumes the "new buyer" has the requisite skills to conduct a rehab or are you saying the new buyer can sub out the work?  

@Rob Randle, I believe an ideal loan option (that for some reason doesn't seem to be very well known) is the Fannie Mae Homestyle loan. It is similar to a 203k but isn't limited to owner occupy. I just closed on a place using this loan and so far I'm very happy with it and looking to do more. I've heard it can be a challenge to find lenders that do this loan, but I didn't have much trouble in my area.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.