How to fund a deal with a mortgage already
Hey there bigger pockets!
Hope all is well! Just want to come on here and air out some of the challenges my team is facing and wondering what everyone else did when they ran into something like this. We currently have an FHA buyer in place for our second deal however it entails having to possible extend a storage room thats not livable currently. What makes a home FHA compliant and would we really need to extend? (Details below).
In order for us to start the rehab work on this second home we have to finish up a current property which still requires another $15k work to finish off but we keep running into problems with the contractor deposit and since they originally wanted $3k down and $8k on completion but now they keep coming back that they want the $3k down and then another $3k the next week when this wasn't apart of the original deal. We specifically have it as the rest is due on completion because of our reimbursement schedule with the hard money lender. They reimburse us the money with the money in escrow that covers the rehab. Do I get another contractor in or what would you do?
We are currently working on two projects in Orange county, NY (Middletown and Port Jervis/greenville). We have the following numbers on the deals:
Property #1
ARV: $320k - $340k
Purchase price: $130k
Repair: $85k
Hard money lender loan: $178,750 - 13.5% interest 4 points
Although this project is a great deal, the problem we ran into was not having enough capital to get the rehab done in order and also having to hire and fire contractors along with letting a family contractor take over the job but putting too much into an extension of a home. This project has been delayed more than once which has cost us a lot of holding costs and an extension on current loan for an additional 9 months. We have tapped out in term of finance to finish off the rest of whats left but we need the time to build up capital from our own income which still costs more.
Property # 2
ARV: $160k-179,900
Purchase price: $55k
Repair: $55k
Hard money lender loan: $72k - 13% interest 2 points
We have a buyer lined up to buy at $175k with an FHA loan. They want an extra room by extending the crossover into a livable bedroom space. This alone will cost $20k and yet we dont know i FHA regulation will be fine with the room as is since the doorway is actually much higher than the storage space entry (crossover). We mentioned that we have to think about the plans for the situation, to the buyer. What would you guys do with an FHA buyer and how would you handle the extra rehab for and extended room when the current loan isn't covering that?