New Member, Looking for suggestions for rehab funding

[Darius Holloway]

Hello all! My name is Darius Holloway. I currently reside in Washington, DC. I am an attorney and looking to get the wheels rolling on a real estate investment venture. I'm pursuing a 3bd/1ba property in Hopewell, Virginia with the intention to rehab it to 4bd/2ba. The property will be bought cash out. But after that, I will need funding for the rehab. After which, I intend to take out a mortgage to pay off the rehab costs. Any suggestions for the best approach, or short term loan rehab funding companies?

I'm so glad this space exists, and happy to be here!

[Nghi Le]

Can you clarify the numbers? From what it sounds like, it's going to be a $20k purchase and $40k rehab. What's the ARV?

I would recommend borrowing both purchase and rehab.  The reason is that short-term lenders will fund the purchase directly, but place the rehab funds in escrow.  Which means that if you only borrower the rehab, you won't actually have money to do the rehab (assuming you spent it all on the purchase) because rehab funds are given to you as a reimbursement in draws.  So you need initial funds to start the rehab, and then you would ask for a draw to reimburse you for that portion of progress.

Also the loan would cost the same either way (in points) as lenders will charge a flat fee for small loans.

If you plan on doing a mortgage to get your money back, having a high loan amount would be better as well for rate & term refinances, which you can do anytime and won't need to wait 6 months (unlike cash-out refi).

Keep in mind that VA requires that you purchase in the name of an entity if you want to use these short-term lenders.