Best way to finance a rehab while owner occupying?

[Jimmy Lieu]

What's the best way to finance a rehab? I am planning a house hacking strategy and I am specifically looking for properties that I can add value to (by adding a bedroom, bathroom, etc). The thing is that I do not want to use my own capital unless I really have to (capital is currently tied up in stocks, crypto, etc).

If I don't want to use my own cash to finance a rehab, what would be the best way of doing so? I've talked to a few people and they stated that I can get a traditional rehab loan (as an owner occupy) for around 5-10% interest (based on risk). In addition, I've heard of people using credit cards where there's no interest if it's paid back in a year or something like that.

Here's my thought process. Let's say I close a property for 100k and it needs 20k worth of repairs done. Can't I just take a bank loan for 20k with like 10% interest or something pretty easily? And after I finish the rehab, let's say the property is worth 150k. Can't I just refinance the property, pay off my debt of 20k plus interest, and have around 30k cash on hand?

Does that work? Is this a good way of financing a rehab? Or are there better ways that I have not thought of?

[Brandon Dumbuya]

@Jimmy Lieu

You may also be able to use a Fannie Mae HomeStyle renovation loan and put down 5% without the need to occupy the property. The down payment increases significantly if the property is more than one unit though. The interest rate I got was below 5%. Your renovation allowance would be the difference in appraised ARV and your all-in cost.