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Rehabbing & House Flipping

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Daniel Tisdale
  • Investor
  • Austin, TX
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Advice for turning rental into a flip

Daniel Tisdale
  • Investor
  • Austin, TX
Posted Feb 9 2024, 16:19

Hi all,

I have an old 1962 house in Austin, TX that has been used as rental for the past 2.5 years. This was originally my primary residence and I am trying to get advice on how I might be able to rebuild a new property and flip it. How does someone typically finance these types of projects? I bought the property at about 2/3 of the current value and would hate to have to sell it to a developer to reap the benefits, but I don’t have the cash on hand to rebuild it myself.

What does someone typically do in my situation?

Thanks,

Daniel


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Bill J Fay
  • Lender
  • Denver
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Bill J Fay
  • Lender
  • Denver
Replied Feb 9 2024, 17:22

Are you trying to renovate the property or tear it down and rebuild with new construction? Most lenders will be able to lend in either scenario, but you will need ground up construction experience if it's the later. 

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Clint Jusino
Pro Member
  • Dallas
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Clint Jusino
Pro Member
  • Dallas
Replied Feb 9 2024, 18:54
Quote from @Daniel Tisdale:

Hi all,

I have an old 1962 house in Austin, TX that has been used as rental for the past 2.5 years. This was originally my primary residence and I am trying to get advice on how I might be able to rebuild a new property and flip it. How does someone typically finance these types of projects? I bought the property at about 2/3 of the current value and would hate to have to sell it to a developer to reap the benefits, but I don’t have the cash on hand to rebuild it myself.

What does someone typically do in my situation?

Thanks,

Daniel


I just bought a house that's 1963 in the Dallas area. I'm currently renovating it to rent it out. I plan to BRRRR it out. Have you thought of just renovation to make it more modern? Those houses I have learned are built to last. My current contractor is so amazed at how well it was built with all real materials. I say renovation it and keep it. I heard you can do a DSCR loan that will help with your finance situation.
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AJ Exner
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  • Lender
  • Springfield, MO
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AJ Exner
Pro Member
  • Lender
  • Springfield, MO
Replied Feb 9 2024, 19:29
Quote from @Daniel Tisdale:

Hi all,

I have an old 1962 house in Austin, TX that has been used as rental for the past 2.5 years. This was originally my primary residence and I am trying to get advice on how I might be able to rebuild a new property and flip it. How does someone typically finance these types of projects? I bought the property at about 2/3 of the current value and would hate to have to sell it to a developer to reap the benefits, but I don’t have the cash on hand to rebuild it myself.

What does someone typically do in my situation?

Thanks,

Daniel



 Hey Daniel,

It sounds like a Refinance-Rehab.

So it would be a 12 month interest only bridge loan that would give you a little cash from the existing equity in the home, plus an escrow account that would reimburse you for work that you want to do to the home (assuming the work adds value to the home). 

Then when you are done, you refinance the home to something long term and hang on to it at its new price. It would be two separate “transactions” but a great way to leverage value in the home to help renovate it and make it better. 

Hope that helps, let me know if I can point you in the right direction! 

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Jake Baker
Tax & Financial Services
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#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Investor
  • San Diego, CA
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Jake Baker
Tax & Financial Services
Pro Member
#2 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Investor
  • San Diego, CA
Replied Feb 10 2024, 21:53

@Daniel Tisdale

You may want to consider doing a BRRRR. You can cash out refinance which is not a taxable event.

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Joey Zawacki
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  • Investor
  • Macon, Ga
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Joey Zawacki
Pro Member
  • Investor
  • Macon, Ga
Replied Feb 11 2024, 10:12

I would be interested in buying it on a creative finance offer: I buy ASIS and seller finance the equity.

or 


We do an equity protection program: I.e. Novation Agreement. I do all the rehab and retail it for you. I pay off my lenders, I get 15% of profit on sale, You get paid at closing the remaining profit

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Gall Davidovitch
  • Investor
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Gall Davidovitch
  • Investor
Replied Feb 12 2024, 11:19

If you don't have the cash to rebuild the house. one method I suggest is utilizing credit card funding through an agency that helped me secure $150,000 on my credit card with 0% APR for 12 months. This allowed me to proceed with the necessary rehabilitation of my house without having the required capital upfront. Once I've added value to the property, I have the flexibility to decide whether to sell it or refinance for a cash-out option, enabling me to repay the credit cards.

I'm not a financial advisor, just simply sharing what has worked for me. 

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Jacob Sherman
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#1 Rehabbing & House Flipping Contributor
  • 12 Penns Trail Suite 138 Newtown, PA 18940
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Jacob Sherman
Pro Member
#1 Rehabbing & House Flipping Contributor
  • 12 Penns Trail Suite 138 Newtown, PA 18940
Replied Feb 12 2024, 14:09

Hey ! You can do it as a cashout refinance fix and flip loan based off the ARV or even a 2nd mortgage upto 85% of the current as is value . Depends what works best for you