Funding rehab costs for flip?

Question

Does anyone have any experience getting rehab costs put into the mortgage loan itself? For example, 50k  purchase price, 100k rehab for a total mortgage of 150K. I am looking to help fund a flip but would not have enough money to fund most of the rehab out of pocket. Any help would be appreciated, thank you.

David M. · Answer

@Kyle Wahl

Either do a hard money loan (normally won’t do 100%) or a 203k renovation loan.  The former is a short term loan with at a higher cost but much more flexibility.  The latter is really a FHA product with all the inspection requirements, much more approvals and info (to even get the loan), required to use one General Contractor (properly licensed or registered as required by your state/locality), need to pay for inspector for each monetary draw (so either your contractor will work on credit or you need to float cash)

That’s the quick points. Good luck

Aigo Pyles · Answer

@Kyle Wahl

You can go for a bank loan or private money lenders.

All the best!

Amy Quintero · Answer

Hi how did this work out for you?

Odie Ayaga · Answer

As others mentioned this sounds like a hard money deal. However, you may still have difficulty funding as, not only is it lopsided (rehab greater than acquisition), but the property itself is low value. You may find someone who will do it, but it may be considerably more difficult than if the numbers were flipped.

Ray Evans · Answer

@Kyle Wahl You got a lot of great advice you will not get traditional funding.Period .There are fix and flip lenders who also do long term or straight to rental financing.Your Funding would be 70 -75% of your ARV.I have found that many will not loan more for the rehab than the PP.

Best of luck.

Joe Freeman · Answer

@Kyle Wahl Private money lender or hard money is the easiest way to go and what all of my investors do outside of all cash. There are many out there and some will require good credit and experience with investment properties, others will not. Just to give you an example I know of terms with 20% down on purchase, 70% of ARV being max loan amount. So in your example of $50k purchase and $100k rehab ($150k total), your ARV would need to come in around $215k to hit the 70%. Some of these lenders also have a minimum purchase amount to ensure the deal makes sense for them as well. In any case if you are looking to flip properties I would suggest to start contacting PM or HM lenders and find which one works for you. Best of luck!

Darius Ogloza · Answer

If you do get the loan, don't be surprised if they hit you up with a lot of points up front.  Good luck!

Kyle Wahl · Answer

@Darius Ogloza yeah I was thinking the same thing, we have data from a realtor showing the ARV would be in the 225k to 250k in the area.

Darius Ogloza · Answer

I think you will have insurmountable difficulty persuading any lender to do this deal unless your factually-supported ARV is way higher than $150,000.  Here, you are asking the lender to take a $150,000 risk on collateral worth only $50,000 at the time of acquisition.  What if you ran off with the $100,000?  They would have no recourse save for the $50,000 .  At a minimum a personal guarantee will be required.  Do you have assets that will support such a guarantee?  If not, friends and family may be your best/only route.

Kyle Wahl · Answer

This is some awesome information thank you guys! What is great about these forums is you never know who else might have the same questions or learn something from others posts as well. Once again thank you!

Funding rehab costs for flip?

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