Rental with Convential financing - What about rehab

[Adam Craig]

I am starting out buying SFH's buy and hold rentals under 100K in Cleveland suburbs. I have Good credit/20% down/W2 income so I will be using bank financing.

Instead of buying "ready to go" homes - I want to buy slightly distressed properties and cosmetically rehab them. I know that's where a lot of deals are and I really want to learn about rehabbing (not swinging the hammer but knowing what goes into it and how to manage it).

How are conventional borrowers financing repairs on buy and holds? Are 203ks common? Short term loans? Cash? I would love to wrap it up in the loan but not sure if that is being done.

Thanks for your thoughts.

[Ryan B.]

I am purchasing sfr's that need rehabbed and then keeping them for long term rentals. Here is what I did. Found an investor friendly, small, local bank. Moved all of my deposit accounts to them to sweeten the relationship.

In the beginning they were giving me construction loans based off the ARV. As long as I was going to be all in for under 75% ARV, I would not have a down payment or anything. Then I would refinance to a conventional mortgage once the rehab was completed.

They will not go over 4 fixed rate loans so I now have to go with balloon loans that they keep in house. But since I have built a great relationship with them, I am now allowed to just keep it under 85% ARV. I also don't have to do the construction loans and then refinance anymore. I now just give them my estimate for rehab and they cut me a check for it at closing.