Best way to fund a rental property rehab?

2 Replies

Was wondering what could be the best way of funding a rehab project. Would saving cash, getting a loan, or using credit be one of the best options? The home would be use as a rental property.

@Christian Cruz

If you don't have cash to purchase the property, a conventional renovation loan is the best route to go. Many properties that need renovation, don't typically qualify for conventional financing with the work that is required. 

Funding renovations:

It depends on how extensive/expensive the renovations are.  Cash (savings) for the small ones and possibly financing for the big renovations. As of summer of 2019, there are some loan programs that help with financing the purchase and the renovation.

In regard to credit cards. Credit cards can be good or bad depending on the user. If using credit cards, use a business credit card in the name of your LLC. Avoid putting the balance on your personal credit cards since this will reduce your FICO score and may hurt your chance for qualifying for loan financing at a critical time. Of special note: Not all LLC business credit cards are the same, some of them will report the balance to your personal credit report, thus partially defeating the purpose of putting the repairs on the business credit card in the first place. Chase VISA Business card does not report the balance to your personal credit, Home Depot and Capital One do report the balance to your personal credit.

Pay off the credit card each month, if you cannot and you still wish to use a credit card, find one with an introductory low 0% APR for a year.