Unexpected 25K Expense on First Property – Financing Options?

[Zane Lyons]

Hi all,

In a bit of a predicament on my first deal. This first one has NOT been easy and we have been under contract for nearly 2 months now, but I am committed to make it work because I think it is a good first deal.

I am under contract for an off-market 4bd2ba 1800sqft property in a desirable location of my city (SLC, UT) for 400K that needs some TLC but is livable. I was planning on house-hacking and renting out the mother-in-law duplex basement (more updated than the upstairs), and rehabbing the upstairs while I live in it, some DIY and some contracted out. For those unfamiliar with this market, this is a pretty good deal. Nothing ridiculous, but certainly good. I am expecting to use a 10% down payment (I don't believe the property will qualify for an FHA loan) which admittedly is nearly all of my liquid funds.

Now, the problem arose when we discovered it was entirely knob-and-tube wiring in the upstairs. I am not able to insure the property except for an expensive fringe policy with the stipulation that I entirely rewire the upstairs within 25 days. I received bids from 3 different electricians and all were right around 20-25K for the work. I checked the numbers and even at 425K, it's still a good deal, but the problem is I do not have an extra 25K on hand for the rewire within 25 days.

Because the wiring affects the "livability" of the home, my mortgage lender says we cannot simply raise the purchase price 25K and receive it as a credit. I attempted to work with the seller and see if he would be willing to get the electrical done before closing so we could simply bake the price into the mortgage but he refused, saying at that point he might as well rehab most of the upstairs and sell it on-market for more. I don't think he knows what he would be getting in to with this, but regardless this is where we are at.

I have a pretty good relationship with the seller and he said I can take my time figuring things out and deciding what I want to do, as he wouldn't get into the rehab himself until late December or early next year. So now I am at the point where I need to do some finessing to find a way to afford this expense and take advantage of this deal.

What is the best way I can come up with 25,000 in a month? I have considered lowering my down payment (though am not certain I can), a personal loan/line of credit, or even hard money, but I am not sure how I would get the hard money out to be honest.

NOT including the electric, I expect roughly 50k in rehab for the upstairs bathroom and kitchen, with an ARV of 525K or more (I want to be conservative as this is my first deal, and Utah is a non-disclosure state so comps are a little more difficult). This would total ~475K all-in, which at 80% doesn't quite let me cash out re-fi to pay back hard money.

Apologies for the length, but any help would be seriously appreciated. I'm pretty stressed over this first deal as I was expecting to be moving in right around now, and really don't want this to fall apart because of how hard I looked for a deal like this, and I believe there is a solution. Thanks in advance <3