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How to fund large rehab
Hello BP community
I'm looking for advice from some of you seasoned/experienced and savvy investors out there.
I am a newer investor with one property at the moment. A 4-unit house hack I bought last year with FHA loan in Omaha NE. I am now ready to buy another property with the same house hack/FHA strategy. I have been looking in Austin TX as I am planning a move there.
My realtor found a 4-plex for me at a discounted price because it needs a LOT of work.
The asking price is $675. It's hard to find comps nearby for a 4-plex and updated small MF properties but based on a few recently sold duplexes and a triplex within 2 miles if the price per sq ft is extrapolated (range $280-320 per sq ft; property I am looking at is just over 4000 sq ft) ARV is potentially $1,120,000-1,280,000.
I obviously plan to get estimates from a few contractors but based on videos and photos of the property one estimate I got is it may cost $200-250k to update completely. Again this is a quick estimate and I will have contractors actually walk the property to get more accurate estimates.
The question I had is, what is the best (or some best ideas) for how to pay for such a large rehab if in fact I would purchase the property?
I have the capital to cover the loan down payment but certainly not that big of a rehab. My mind keeps thinking of one of the mindsets/quotes to change from thinking "I can't afford this" to "how do I afford this," and that is where I am hoping those of you with much more experience can help me.
Some thoughts I did have were to stretch out the rehab and cost. I will likely just rehab one unit at a time which would work well as one unit is open now and the rest are filled with tenants on month-to-month leases. I know I have heard people talking about using PML, hard money loan, interest free credit cards but I'm trying to figure out what might be the "best" strategy or ideas that I'm not thinking about (loan from my 401k?). I don't have enough equity in my first property that I can use a HELOC. I didn't really want to use a FHA 203k loan given it is so much extra money I would then be paying interest on for 30 years and with the higher rates today, though maybe I'm wrong?
I appreciate any input/advice! This is a great community to be a part of and I realize I need to lean on it more for guidance.