My First Property. $2000 in cash. Money to Rehab?

5 Replies

Hello Bigger Pockets,

I’m glad to join such a huge community of like-minded people.

My name is Preston. I own an engineering company and I'm new to real estate. I've been learning from my real estate friends for years and my interest has peaked and I'm ready to get started.

I’ve got an opportunity to purchase a property that’s distressed for $2K. The property was recently assessed at $21K.

Since I’ve Rehabbed other properties with my friends. I’m confident I’ll have the rehab handled.

The issue is financing the rehab. I've been told by a few loan officers that if purchased for $2K, I wouldn't be able to get a Home Equity Loan.

I wonder what others have done before on super cheap properties and what advice you might have or alternative options on financing the rehab.

I do plan to rent the property. Although a flip may be a possibility.

@Preston Hadley usually anything that will sell for $2k is going to take tens of thousands to fix up and can have a lot wrong with it, thus it is a big risk even for a HML. What is the ARV if it is only $20k fixed up then you probably don't have much room if any for profit. Out of curiosity where approximately is this property, how big is it, is it anywhere close to habitable.

@Preston Hadley what is the ARV? doesn't make sense to spend $22k on a property that will be worth $21k when finished, you take on a lot of risk and work for no financial gain, plus you're probably on the hook for those back taxes, if your relative doesn't pay them with the $2k purchase price.

I can't see any bank offering a line of credit on a property that you're describing, but here are some ideas you can consider:

1. Put it on a credit card (maybe your last option)

2. Request an unsecured line of credit from your bank.  Wells Fargo, US Bank and similar will often do up to 15k or 20k with very little verification unsecured.

3. Ask a friend to partner?

4. Ask a local bank for a commercial loan on the property - will likely be 15-20 years and 6-8 percent interest, but still that's next to nothing if you can get it rented out.  That would afford you the time needs to renovate, pull capital back out and move on to the next.  Good luck