Rehab loan for 4 units?

Question

Dylan Vargas · Answer

@Cyndi Price..welcome Cyndi! Penn Valley is a nice area. Lake of the Pines, Grass Valley, Nevada City etc. I was surprised to see some lower house prices than a few years ago. (2010). Good luck to you.

Ben Stoodley · Answer

Hi @Cyndi Price and welcome to the best online source of REI!! If the 203k loan doesn't apply, I think your best option may be to use a HML to acquire and rehab the building first, then refi out into a conventional loan. This is essentially the BRRR method - Buy, Rehab, Rent, Refi.... Justin on here teaches this method very well. A hard money loan on something like this would finance up to 80% of the purchase price + 100% of the renovation costs. Rates would range from 9-12% with an origination charge of 2-4 points. There shouldn't be more than about $600 in "other fees". Make sure there is NO PREPAYMENT PENALTY and the lender is flexible on extensions. After you renovate the property, get it rented asap and let the property/loan mature for about 6 months at least and you should then qualify for a conventional loan. ** I would speak with a mortgage broker to review your options for the refinance out of the hard money loan, so you know what to expect in terms of LTV and how long you will need to pay the Hard Money rates. I would bank on a 12 month Hard Money loan, then refi somewhere in the 6-9 month range, assuming all goes fairly well. Feel free to reach out with questions. Good luck!

Anthony Susco · Answer

Cyndi,

I have completed many projects like this by using Hard Money to complete the rehab and then refinancing with a traditional bank or longer-term private loan once the rehab is complete and the units are occupied.

Feel free to message me with any other specific questions and I'd be happy to share my experience.

Jo-Ann Lapin · Answer

you should be looking for a HML

Nnabuenyi Anigbogu · Answer

You can also look into using bank financing for this and treat it like a value add play. There are bank products from portfolio banks that can do this. Since this is already a commercial loan (greater than 5 units) you might have more flexibility from a bank.

James McAlister · Answer

Hey @Cyndi Price,

This seems like a reasonable scenario.

Technically, the BiggerPockets Marketplace is better suited for questions like this, asking about specific companies.

Also, you can start searching for lenders in your area in the BiggerPockets Hard Money Lenders directory.

Depending on the type of property & details of the scenario you outlined, chances are a Private Hard Money Lender is going to be the best (and perhaps only) option... especially because of the rehab funding requirements.

As far as competitive loan rates & terms, it's hard to say without knowing a bit more about you (and any other partners / borrowers). Roughly you can expect between 3 - 5 Points as an Origination Fee and 8% - 12% Interest.

It also might make sense to go for a short-term Private Hard Money Loan (HML) for the first 12 - 18 months while you finish the rehab, and increase occupancy & rents, at which point you could refinance onto a longer-term loan program with better rates (potentially even qualifying for traditional bank funding).

We have some experience with Apartment Building Hard Money Loans in California, so feel free to contact me directly if you would like any more specific details or have any questions.

John D. · Answer

Hi @Cyndi Price-

I've done a lot of work in your area.  Super strong rental demand right now!  Can you provide some more information on the property, to help us better answer the question?

-How many units?  Are they occupied right now?  Are the habitable as-is?  What is your profile (experience, credit, how does DTI look, etc.)?  What is the basic scope of work for the rehab, and what is the expected turn-around time on that?

Jo-Ann Lapin · Answer

Welcome private piñon this . Happy to network

Rehab loan for > 4 units?

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