Funding Options to Rehab an Inherited Home (No Mortgage)

[Darryl Hunter]

I am looking for the best option to rehab a home I recently inherited to turn it into rental property.  The home is completely paid off but in terrible condition and will need to be completely renovated.  It was appraised by the state for 90K and the first rehab estimate I got was for over 300K.  I am waiting to get the 2nd estimate and will be looking for a 3rd soon. My main questions are:

1. What is the best way to determine the homes ARV?

2. What are my best options for funding this renovation? Specifically the types of loans (Hard Money? Rehab loan? HELOC?) and where I should look for them.

Let me know if more info is needed to help.

Thanks

[Perry Farella]

There is a nice 30 year term rehab mortgage that will work for an Investment property in this situation. It is called HomeStyle. I work with investor clients who have paid all cash for their home or inherited it with no mortgage but need funds to rehab it prior to leasing to tenants. The loan size can be up to 75% of the Future Completed Value or ARV as determined by a local Appraiser. Since you own the home already no down payment is necessary. It is really 100% financing based on future ARV. The rules are that the rehab loan size cannot be greater than 75% of future value or ARV; you cannot have more than 4 already mortgage properties ( this is for small investors) and there must be a 10% of rehab budget Emergency reserve built into the loan for unexpected cost overruns during construction/rehab. This may be better than a Hard Money lender since you have 30 years to repay it; a fixed interest rate about 6% usually based on your credit score as Hard Money rates may be in the range of 8% to 15% locally; low fees generally and do not need any rehab experience to use this type of financing. My Blog has stories of how it has been used. Happy to answer any questiosn.