Rehab to Rent Purchased with Cash - Now What?

[Josh Wilkerson]

I'm working on closing my first rental property. It was a state owned home that I purchased for $2500 cash. It's going to require about $40k in rehab but will have an ARV of ~$95k and rent for $700/mo. I'm struggling with the next step of financing the rehab. I'm aware of PML/HML other creative financing methods but am not up to speed on how I could recover the funds to pay off the HML. Would this be through HELOC? Is there a seasoning period for HELOC or can I apply as soon as it's rehabbed and rented?

[Tim Johnson]

You would pay off the hard money loan by financing (refinancing) the home after your rehab. A LOC is one way, but maybe a regular 30-yr fixed rate mortgage is best for your long-term rental plan and cash flow? If your ARV / appraised value is $95K you should be able to pull out at least $70,000 of that.... pay off the HML and have some left over for the next project. If you've done your numbers correctly your renters will now be able to cover all other expenses.