where to go for rehab financing

Question

Hi Everyone,

My mom owns a 2 family home that requires a gut renovation.  The home does not have a mortgage on it.  The cost to renovate will be over $100k. Once renovated the house will be over $300k. I'm looking for financing options to share with my mom.  She is not planning to live in the home (she does currently live there - right now it's vacant).  Once renovated but will fix up and I will ultimately find tenants and use the rental income to finance her living expenses.

What is the best way to get financing to renovate the home.  I was starting to look at 203k loans.  Thanks in advance!

Rene Bee · Answer

Thanks!! I will look into these options!

Evan Polaski · Answer

@Rene Bee, I defer Matthew regarding 203k loans, but I was under the assumption these are for owner occupants (not the case here) and with minor rehab needs ($30k max).  Again, Matthew seems like he would know more about 203k specifically.

I use local lenders and take out construction loans.  They will lend up to ARV, assuming you have good credit, are fairly low interest, and your interest is tied to amount drawn.

Matthew Porcaro · Answer

You want to locate lenders in your market that specialize in renovation loans like the 203k or HomeStyle loan. The 203k Loan is an FHA loan, and the HomeStyle loan is a Fannie Mae product.

Either one can suit you, or there are a few others. You could also take out a home equity line of credit for the work, or do a cash out refinance.

Because you own the home outright, you have many options, which is great!