Need advice on financing rehab for investment property

[Bryan Liu]

I am trying to finance my repair and renovation for a duplex investment of 2500 sq ft property that I recently purchased. This property is in California in the LA area. The repair for foundation and earthquake retrofit comes to $97,000. Updating the interior is costing me $63,000 for demo, installation, and materials. I would provide the vanity, bathroom tub and shower, kitchen cabinet, flooring, and all the hard wares. I think I would need to borrow at least $190,000 or more to complete the rehab. Luckily, both unit is vacant and I'm looking for options to finance this rehab. Looking to rent both units as long term once completed. 

I have tried going through the conventional route of HELOC and Home Equity Loan for my primary residence. Both side said that my DTI was too high and I wasn't qualify to borrow. I was told from a rep that if I could get someone to sign a lease agreement for about $3,200 - $3,600 per unit, I would qualify. Or, put my rental property in an LLC. My mortgage lender said they aren't able to do this and sent a letter saying it's not possible. Currently, asking some of my close friends to help sign a lease agreement with me. I provide them with the rent amount and they write a check in their name.

My wife and I with my VA disability make $64,100+$88,608+$17,840=$170,550 or $14,212 a month or less. Our debt include only our primary, the duplex, and credit card $3,175.91+$7,317.49+$2,000=$12,493. If we take the minimum for credit, it will be $100 instead of $2,000 or less.

We have stock portfolio that we don't want to touch for the rehab around $200,000 that is liquid upon selling. 

I been researching hard money lender, but struggling to find one that meet our needs. If you have any advice please leave a post and if you have a reference to lender that meet our needs please message me. If I am missing any information that could help our case let me know so I can include it in when talking to lenders. 

Please let me know if I should include a location for this post, if that helps.

[Malcomb Stapel]

@Bryan Liu this isn't going to be what you want to hear, and it will sound like I'm being harsh. But, the situation you spelled out raises a lot of red flags. 

You bought a duplex recently bud didn't have a solid plan in place to finance the repairs. Now your trying to figure out the renovation money after the fact. 

You might have your friends sign a lease and cut you a check. This is also known as a "magic lease" and it will qualify you for mortgage fraud if you are caught. Just be aware and be careful. 

You are talking about making minimum payments on your credit card to help finance repairs and according to your numbers the mortgage on the duplex is already at half of your monthly income. 

Honestly, the picture you painted sounds like a disaster. It's possible you could take the loan to another bank that is willing to do purchase plus rehab, but there is likely a seasoning requirement. The real play here might just be to take a step back and evaluate if this deal is going to actually set you up, or ruin you financially.