Looking at a duplex in Everett, WA for 500k. After inspection I realized it needs a lot more work than I thought. Will need updated plumbing, electrical, potentially a foundation fix in addition to new windows and basically a full remodel of the upper unit. Estimating between 40-80k depending on what gets done.
With the price of the house I wont have money to fund the rehab. What are some solid options for financing? Hard money, bringing in a partner, etc
Do the numbers still work to make this a good deal with all the updates and fixes you're talking about? If I were you, I'd attend the local meetup and talk to some other investors about the project and ask them if they would want to partner/lend on it. As far as getting financing on it, I have a hard time thinking a bank would want to finance that, so hard money could be a great option too, just make sure you have enough equity after fixing it up in order to pay them off though.
Makes sense. Just to confirm, enough equity is needed to refinance, pull cash out, and pay hard money lender?
Your expenses plus rehab costs shouldn't exceed 75% of the ARV if you plan on using hard money.
@Connor Lorio , it sounds like you have some more research to do before really looking at buying a property, which you are clearly starting to do by asking this question. As noted, if you are going hard money with a 1 yr term on the loan, you need to be sure you have sufficient equity in the deal to take the loan out. You are also going to be greatly increasing your monthly carrying costs every month the HML is outstanding.
Real estate is an investment like any other. You can make money or lose money, and money is made when you buy. The more you pay, the lower your returns will be, all else being equal. You make your returns from cash flow and appreciation, with typically a vast majority coming from appreciation. Clearly everyone here is bullish on real estate, but sometimes I get the sense that many people are sold that real estate is the only way to build wealth, which is simply not true, and for many it is not even a good way to build wealth.
Hard money may not be an option if you already have a first position mortgage for the acquisition, although there are some out there that will do a second but expect to pay through the nose for that. Private money would be another option. Partner another option. Credit cards or line of credit would be more options. As with any investment, a sound financial analysis of each option side by side should be compared to see what is best for YOUR situation.
I can take a look at this deal man. 12 month rehab loan would be a good option for you.
@Connor Lorio how much cash do you have total?
what do you think the ARV is when you are done? are you holding it or flipping it?
@Connor Lorio , do you have HELOC on your primary residence, or this is your first property?. If you have another property with HELOC, you can pull some of the money out of this HELOC to finance the rehab