🏠 Real Estate Investors — need your input on structuring a deal!

[Dani Beit-Or]

I came across a property with some interesting numbers:

📍 Asking price: $330k

📍 Market value: ~$440k

📍 Needs about $65k in repairs (no floors in most rooms, so it won't qualify for conventional financing as-is)

Here's what I'm thinking:

Instead of buying it in its current condition — which would require a huge down payment AND renovation capital upfront — I want to negotiate an OPTION with the seller. The option would lock in a purchase price of $300k within a set timeframe. During that time, I'd complete the $65k renovation, and by the time the option is exercised, the property would qualify for conventional financing.

My question is around the financing structure at the time of purchase:

I want to make sure I can recover the $65k I put into renovations at or around closing. What are the cleanest and most lender-compliant ways to structure this so that my renovation investment is recognized — whether through the appraised value, a cash-out refi after purchase, or some other mechanism?

Have any of you done something similar? How did you structure it? What worked, what didn't?

Drop your experience below 👇 I'd love to hear how seasoned investors have handled this!

[Alex Rastorgouev]

The option strategy makes a lot of sense here given the spread you're working with. $300K option price against a $440K ARV with $65K in rehab means you're looking at roughly $75K in built equity after the work is done — that's a solid margin of safety.

For recovering the $65K, the cleanest path in my experience is a delayed financing exception if you can close the option and purchase within 6 months. Basically you buy at $300K, and then immediately do a cash-out refi based on the new appraised value (which should come in around $440K post-rehab). At 75% LTV on $440K, you'd qualify for a $330K loan — that covers your $300K purchase price and $30K of the rehab. The remaining $35K you'd need to float from savings or a short-term line of credit until the refi closes.

The other route is finding a lender who does renovation loans or a portfolio lender comfortable with the option structure. Some local banks and credit unions will underwrite based on as-completed value rather than as-is, which could let you finance both the acquisition and rehab in one shot. That said, the option agreement itself can make some lenders nervous — they want to see a standard purchase contract, not an option. Worth having that conversation with your lender early before you lock in the option terms.

One thing I'd flag — make sure your option fee is reasonable relative to the deal. Sellers sometimes want a big non-refundable deposit to grant an option, and if the rehab goes sideways or takes longer than expected, that's money at risk. What's the timeline you're thinking for the renovation?