Flip to Rental: Conventional Loan and HELOC

[Matthew Kenny]

I've found a house (my first investment prospect) that I could flip with good margin. 

The lenders I've talked to said 6 mo or less wouldn't get me a traditional loan and I'd likely have to go with a rehab loan. 

Is that going to costly versus a traditional loan? What's the up or downside compared to a traditional?

I'll need to use equity from my personal residence to assist in financing the purchase. 

If the rehab loan is too costly, I thought I might buy with a traditional loan via cash and a HELOC, fix it and rent it until the 6 mo is up.

Anything I'm missing? 

[Damir Kamber]

@Matthew Kenny have you tried using the Fix and Flip Calculator in the Tools section? You are giving yourself a 50K spread and you will probably end up using a hard money lender. They will charge you between 3-5 points since it's your first deal, so your down payment is 3-5K if they are lending you the entire 100K. They will also charge you an interest rate somewhere between 12-15% so you are looking at monthly payments of 1000-1100/mo, plus all the other monthly holding costs like the utilities, etc. So right there you are at 50K - 4K - 4,500 = 41.5K - 9K for the agents when selling, you are at 32.5K. What are you estimating in repairs? 

Just some rough numbers for you, the calculator will give you a better idea if this deal is doable. Always do the numbers and the numbers will tell you what to do. 

Cheers!

Damir