Ideas to secure rehab money

3 Replies

I recently bought my second flip. ARV is $170k and I bought it for $110k. I put $15k down with owner finance. It needs a max of $30k for rehab. The person I partnered up with for the rehab did not secure the funds and I am left hanging. An option for me is to refinance the house with a hard money lender but it will raise my interest from 9% to 11% and I would be paying close to $6k in origination fees and closing fees. I cant get a traditional loan at the moment because I am in the process of building a home for my family and my finances are tied up there. Are there other options like hard money 2nd lien loans? Any suggestions?

@Juan Martinez , I think you need to look for another capital partner and might have to offer a good chunk of the potential profit. My calculations show a potential profit of $15-17k. Problem is, you over paid by at least $20k. I'd offer 30-50% of the profit to a potential partner, get this done ASAP, and chalk this up as a learning experience.

@Jaysen Medhurst thank you for your response. If I am giving up 50% of the profit I would probably refinance instead and use the equity from the new hard money loan to rehab the property. I did feel like I overpaid but this was somewhat of a trade. I made a good return on the house I sold, but for the lender to have the funds and owner finance that house he would not be able to rehab this one and we came to the agreement that I would buy this one. I am learning quite a bit from the experience and based on comps there will be a potential profit of anywhere from 10k to 25k. Houses in the area are going for over the asking price. Do you think it is still a better option to find a capital partner than to take the hit on $6k of refinance fees?

I do think a partner is a better option, @Juan Martinez . After the refi costs, you won't make much more. Maybe $3k or so? You're going to lose 30-60 days as the loan closes. Those additional holding costs are going to eat into that $3k, so it's getting close to a wash. Better to get the project rocking ASAP. The additional benefit is the chance to establish a long term relationship with an equity partner that can fund further deals.