Acquired 2-unit pre-Coronavirus, should I push to rehab or wait?

[Juan V Lopez]

Greetings BP fam – I acquired a 2-unit in Chicago in late February 2020 with the intent to BRRRR. Top-line numbers:

• Purchase price: $45,000 cash
• Rehab estimate from Project Manager & Contractor: $100,000
• Conservative ARV: $260,000
• Projected cash-out refinance after fees & interest at 70% LTV: > ~ $22,000

I had a hard money lender (Temple View Capital) lined up and literally the week I submitted our scope of work for the rehab budget was the week the Coronavirus started affecting the US, slowing the economy, closures, etc. They required only 10% down. 10% of $100K rehab means I would only be $10,000 in to get the rehab going.

Long story short – Temple View paused lending for a while and recently put out a statement saying they would continue lending but requiring minimum 25-30% down for all loans. I totally understand, a lot of lenders are locking up or increasing their requirements now.

My team in Chicago recommended either waiting for things to even out or possibly taking out a conventional loan at 70% LTV to start the rehab. But I don't want to invest another $30K into the property right now since I own a donut shop and the virus has taken a big toll on our cash flow. I need to stay liquid.

Question / TL;DR: Would you recommend pushing to get rehab going now and possibly putting down a higher down payment for the rehab loan? Does anyone know of hard money lenders still lending at 10% down? Or would you recommend waiting until things shake out and return to somewhat normal in the lending world before getting the rehab loan?

If I waited, the good thing is I own the building outright, so no mortgage or interest. Just minor utilities as monthly holding costs.

I appreciate any and all insights.

[Eric Johnson]

Juan, I would hold off for right now. It's not worth the risk to start the job and end up with money paid out without the result you are anticipating. (ie 50% completed projects sitting etc...)