Hello BP, I have a dilemma . I recently submitted an offer for a house: 28k and it was accepted. I had some GC to come through and look at the property and estimated about 30k worth of renovations. The mortgage lender is looking at conventional rehab loan as to which I won't be living there. There is a 4.5k contingency policy which brings up the total to 62.5k. If all goes well then the 4.5k is slapped to the mortgage overall.
So the mortgage lender said I would need 21k for total as a down payment (down payment and closing). I have the down payment for the initial mortgage (28k with the closing) roughly 11k. When you add the rehab costs and the number is 62.5k, I don't have the extra 10k for it (the down payment and closing is 20k, I only have 11k). I have been thinking like crazy and I wanted to know what you think the best options would be?
I called a bank about a personal loan and to season it but this lady said it would be tough. I don't own a house so I couldn't let it sit and tell her it was for "home improvements".
The ARV would be between 80-110, so depending on the renovations. I haven't had an appraiser but I have been looking at the comps as well as my real estate agent. I just need to find a way to find the other 10k.
I had a couple options:
1.) Just buy the house and then get a personal loan for the renovations which 30k may be too much.
2.) Buy the house , use credit cards with 0% financing to pay for the renovations and within a year refinance it.
3.) Ask BP for a partner to make a gain on their initial investment.
4.) Any suggestions?
This is my first deal and I want to go through with it no matter what. The upside is great. I'm tired of living in fear and want to get my first one under the belt. I have learned a lot already and need your help to figure out what I should do for that last bit needed if I decide to do the conventional+rehab loan.
I sincerely thank you all!
What does the renovation money cover? Seems light to get you to those ARV numbers...
@Robert Gunby Hi Robert, what is your plan for this house? Are you planning on renting it? Flipping? House hack?
If you were planning on living in it, even for a relatively short time, you could consider an FHA 203k renovation loan. You'd only have to put down 3.5% (or thereabouts) and will get money for the renovation. The loan program is a PIA, with all the hoops and rules, and I wouldn't do it again, but it was perfect for my needs when I did use it. Your payments will be higher because of the PMI, but if you successfully rehab the house and force appreciation, you may be able to refinance at 80%LTV and get your original investment back.
One suggestion I have going forward...know where the money is going to come from before you make the offer! Good luck!
@Robert Gunby....Hey Robert, have you considered a lender that specializes in investor loans? You can probably find one at your local REIA. Many times if you are flipping they will fund 90% or more of the total cost of purchase and rehab.
@Tim Davis I will definitely look into that. Thank you for feedback!
@Katherine S. It's all a process and I am learning as I go. Your information is valuable, thank you so much.
Robert some additional advice get at least a couple more renovation estimates and to piggyback on Katherine questions and comments, you should have an idea of the estimated rehab costs per room and have the contactor provide an estimate by room. There are spreadsheets on bigger pockets file share to assist.
@Robert Gunby , how did you complete this deal?
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