How to get funding for rehab

Question

Okay maybe I'm drawing a blank here but from my understanding when you get financing to buy a house, the bank/hardmoney or whoever gives you money just to buy the house but not to renovate the house and make repairs. Is that correct?

I mean if they don't finance the renovation part do you have to save that money, borrow from a friend or how does that work? How have you did it? Thanx

Jay Luke · Answer

what is usually the criteria to get the bank to give you this loan?

Mason Anderson · Answer

okay thanks you @Katie Neason and @Jon Holdman that answered my question spot on.

Jon Holdman · Answer

Some hard money lenders will lend some or all of the rehab budget, depending on their loan criteria and the deal.  If you can find a bank that does construction loans, they might lend  part of the rehab budget, too.

Rehabbing requires capital.  Even if you find a HML who will lend 70% of ARV and you have a deal where the rehab budget plus purchase prices is also 70% of ARV you would still need about 15% of ARV in cash from another source to do the deal.  That's about the best any HML will do.  Some will require a down payment on the property or rehab.  They may also want to see some cash reserves.

You could try to borrow the money privately, from credit cards or a line of credit, by mortgaging another property or car, or saving it up.

Katie Neason · Answer

financing comes in all shapes and sizes. When we finance our flips we typically get 75% of purchase plus rehab. Depending on the size of the rehab the bank will disburse it all at once or do a draw schedule.