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Updated 11 months ago on . Most recent reply
![Gilberto Ramirez III's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2955538/1709521851-avatar-gilbertor26.jpg?twic=v1/output=image/crop=958x958@0x0/cover=128x128&v=2)
What type of loan do i need ?
I am looking into purchasing a single family home ,and converting it into a duplex ,and a 2 car garage into a ADU what type of loan is recommended ?
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![Mike Klarman's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2453300/1655478398-avatar-mike_k_74.jpg?twic=v1/output=image/crop=3024x3024@0x494/cover=128x128&v=2)
So, if you have no experience this will be a very hard deal 1 to finance.
Right away this is classified as an "Heavy" Rehab job which means rates and leverage change. Way more risk for the lender. Then there are zoning issues when going from SFH to a 2 - 4 unit. Each municipality will have their own laws and codes on the books for it. But you are talking essentially making three living quarters. Three kitchens, three baths, three electrical wirings, three HVAC installations, all the interior work, and then all the finishes. You're talking needing plans, architect drawings, engineering study, a zillion permits and inspections.
I just don't see a lender lending on this kind of deal without that person having major experience that includes some ground up or extensive rehab work.
If you wanna "break in" to the financing world, it is not impossible at all. You will need some money and then you will need the right project. The loan amount on the first deal really shouldn't go over 250k. At that loan amount you will be in 30k - 40k yourself just for down payment, that means through the 6 month life cycle of the project you will be in 60k maybe after all costs. I mean if you have 200k then you can start there, but if you have 60k and can mathematically do it I'd say it is a HUGE mistake to start there.
If you have anything under 100k to start with, then your first deal should be a nice beginner deal. Purchase price under 100k, rehab no more than 75% of the price, total project cost south of 70% of the ARV. Loan amount will be 120k - 150k. A lender will lend on that, even someone with no experience. I've gotten 0s from BP 90% before, gotten a bunch 85% as well. If you have good credit and the asset fits a nice little box for the lender then you can get in the game.