Financing Advice For Seattle Area House Flip And DADU Builds

[Mike Neville]

Brand new to real estate investing.

I’m looking for advice on the best way to finance a project.

My friend has done 3 of these so far, and I am planning to join him on the next one with hopes of expanding the business in the coming years.

Here is the short of what we will be doing:

• Buy a house for ~ $500-800k.
• Remodel if needed.
• Split property into two.
• Build a DADU.
• Sell house and DADU separately.
• (Depending on the size of lot, we may be able to build an ADU and DADU)
• Approximate cost of the DADU will be $300k.
• Total time from purchase to sale of all properties will be 6-10 months

His previous projects were financed with his own HELOC and some money from a partner he no longer wants to work with.

Most of the reading and research I’ve done so far has been confusing in regard to mortgages/loans for our situation.

Every time I search for small business or construction-type loans, it gives me information on loans for those building their own house to then live in later.

So here are my questions:

First, what is the best way to get a mortgage for the initial house purchase? In my brief research so far, it seems as if I can’t simply take out a traditional mortgage since we don’t plan to live there.

Second, what is the best way to take out a loan for construction costs? Do traditional banks give these out? Is an SBA 7a loan something that could be used down the road? Is hard money our only option right now?

Lastly, is there any type of loan that combines the two? Meaning, could we get a mortgage/loan for, say, $1M, buy a house for $700K, and use the rest for construction costs of the DADU?

Thank you for any advice you can give!

Also, any suggestions for good beginner books/blogs/etc. to read would be much appreciated!