Hard Money or Investment Loan?

[Lashaw Salta]

Hi guys,

I have a choice here and I'm undecided on which financing I should use. I like option 2! I want to rehab and rent out a 4bed 2 bath house with a rent by the room strategy. ~700/room being conservative. if not rent by the room 2200/month.

Purchase Price: 255000

ARV: 340000

Option 1:

Hard Money... Fix and Flip loan 90% LTV, 10% down interest rate of 10% would give me a monthly payment of 1966 and 2 points. my partner and I could use a HELOC to finance this and the rehab which is roughly 30k.

I would try and finish the rehab in 3 months, get renters and then cash out refinance at the ARV to get our money back BUT we'd have a monthly payment of around 2500 and rent would be around 2500-2800.

Option 2:

Use a personal invesment loan at 80% LTV, 20% down at 5.25%. I would use most of my cash to finance this, I can't use my heloc. My partner would take out a HELOC to finance her half. The all in monthly cost would be around 2000 and rent would be around 2500-2800. Then we can refinance as we go along and all of the rehab does not have to be completed immediately.

What do you guys think? I want to buy a few more deals this year, so the idea of keeping cash is nice but I think Option 2 is more effective, flexible if something goes wrong and less moving parts.

Thanks,

Lashaw Salta