All Forum Posts by: Michael Kinsella

@Jimmy Francois

80-90% of 'total project costs' is not unreasonable for many lenders.

250k and down is also not unreasonable (to a point).

There are some things that you will want to consider though...

1. Many lenders can advertise 'total project costs' at a relatively high rate (85-90% and even up to 100%), but this will almost always be limited by the LTV (loan-to-value) of the property. Here's a quick example below, Tasbeeh;

Purchase: 100k

Rehab: 80k

ARV: 220k

Let's say that the lender advertises, 'Up to 90% of Total Project Costs!', but in reality they are restricted to 70% LTV.

Here's how this would play out...

90% of the 'Total Project Costs' or 'Purchase + Rehab' is (180k * .9) = 162k

70% of 220k = 154k 

The lender would then take the the lesser of these two values (162k and 154k) to determine the loan amount.

Remember that from the lender's point of view, LTV is their fundamental risk metric, and they are only willing to take so much risk on a given property.

2. With regards to <250k projects, you shouldn't have an issue. Once you dip down to around the 100k mark, things start to get a little dicier.

Warm regards,

Michael

Frank,

Great question. I will preface this answer by stating that my experience is exclusively in investor, non owner-occupied properties.

The lender that I worked for prior to starting Vaia Capital had a ‘sight-unseen' product, in which the max LTV was 50%. Again, note that this was for investment properties.

So, the answer to your first question, ‘Will any lenders lend without seeing the inside of a house?’, is yes. However, that product seems to be rare, as most lenders will want an appraisal done on the property.

Warm regards,

Michael

Rolando,

I think Stephanie P. and others provided some great questions/considerations.

One more thing you may want to look at is,

Is interest being charged on the total loan amount from the get-go, or just on funded amounts? Depending on how large your construction budget is, this can make a significant difference in your total cost of capital.

Warm regards,

Michael