Where to find rehab financing

Question

Hello guys,

I'll try and be as brief as possible. I found a house for $17,500. Its a duplex that has fire damage on one side and the other unit is being rented for $300 a month. The seller is offering owner financing witch is great. I am wondering how I could come up with the funds to repair the damaged side and possibly the side that's being rented so I'm able to rent it for more. I am very cautious of my debt to income because of plans that I have to build new construction next year. I am currently paying out of pockets for repairs on the home I'm living so that I can put it on the market next year. I don't want to mess up what I have planned for next year, but also don't want to stay on the sideline. Any suggestions?

Dylan Doone · Answer

If you were doing conventional financing I'd suggest a 203k loan to help you renovate the damage left over. You may have to be creative with this one since the seller is financing it to you. You could always look into hard money (higher interest rates) in order to take a short term loan to fix it up and force appreciation. If you were doing this with a conventional loan and then you re-fi'd after the renovation ideally you'd be able to pull the extra value out of the home to pay off the hard money loan. Keep in mind the ARV, FMV, and monthly rents you will be expecting. You could pull money out of your own home by doing a HELOC on it therefore keeping the interest rates low. You could take a loan from a 401k which you'd typically pay back through payroll deductions over a set amount of time (loan to yourself). Or lastly that I can think of you could do a partnership with someone in order to put up the cash to reno and give them a share of the profits from the rents you receive or alternatively a set ROR over the value loaned to rehab. You may need to post more specific info about the situation to get more specific advice.

All the best and good luck!

-Dylan