Financing Advice

[Nate Lewis]

Hello, I just have a quick question about some financing options. Here's some back story, I am BRAND NEW to not only real estate investing but purchasing property in general. I'm 22 and live with my parents, never rented or purchased property myself. I took an interest in buy and hold investing and have been gathering as much information I could come across over the past few months. I am aware of some of the creative ways ( such as house hacking, seller financing) but for someone just starting out I would like so stick to something more basic my first time around. I also know of some traditional mortgages, during my research it seems as if a conventional loan is the most common amongst investors. My question is lets say I want to buy a distressed property for lets say $50,000. And I qualify for $100,000. When it comes time to close will I have access to the full amount I qualify for or will the bank only give me the price of the house. Will I have to raise the money and cover the rehab costs myself, take out another loan (lets say rehab costs are 15,000), or will there be any money left from the conventional loan to cover the rehab costs??? I hope I was clear with my question, again I'm a newbie, but I am very eager to learn. Thank You

[Daniel Berthiaume]

Hi Nate,

Sounds like a 203k loan is going to be your best bet, where the mortgage and the repair costs can all be wrapped into one loan. That way you don't have to come up with additional money out-of-pocket after you close on the home. Also, the bank is not going to loan you additional money that has nothing to do with either the renovation or the mortgage of the home. So if the home is $50,000 and the renovations are $15,000, then they will only lend you a portion of $65,000, even if you qualify for $100,000.