Financing Fixer House

[Patrick Lorang]

I'm new to Bigger Pockets and in need of financing advice/direction with regard to purchase of a fixer house, on which I have a purchase and sale agreement. Built in 1890, the home has seen little remodeling and so retains much of its historic charm. It is not derelict, but needs all new electrical and plumbing, interior and exterior repainting, tear-off re-roofing and repairs to the fieldstone foundation. It's in the popular small town of Palouse in eastern Washington. Due to the repair/upgrade work needed, it cannot be financed via a conventional mortgage, or so I've been told. I am well-skilled in plumbing and electrical work, and would like to take care of the home's needs in these areas myself, by permit and to code. Long story short, I can do most of the repair and upgrade work, except for the foundation, on my own, enjoying that kind of work, and saving thousands on the cost of contractors. If I were to get a mortgage in combination with a construction loan, I would be compelled to farm-out all repairs to professionals, greatly increasing the purchase cost. Is there any way to finance this home's purchase and yet retain my freedom to do much of the repairs and upgrades by my own labor? I have looked into hard money lending, but the interest and down payment costs are considerably higher than conventional mortgage financing. Any advice on where to look for purchase financing which affords me the freedom as owner to do most repair work myself? Another problem discovered with hard money lending: so far, I've been told I have to flip the house or rent it out after repairs are made. My intention is to move to this house, and then rent-out the home I presently own and live in. I won't lie about my intentions to make a deal work. This is not a conventional fix-&-flip or buy-&-hold situation. The agreed sales price is $47,500; estimated repairs will bring total investment to around $70,000. Market analysis indicates the ARV of the home to be in the range of $100,000-$125,000. My purchase contract expires in 2 weeks. It has been extended once, already, and perhaps could be extended again. The elderly seller, due to health, is unable/unwilling to do an owner contract. Any realistic options to completing this sale? (I have a good credit profile, with my FICO score in the mid-700's over the past year.)

[Trevor Tilton]

You can take the hard money, then fix the house up and refinance the home @ 75% of the appraised value. In this scenario you pay back the hard money lender essentially flipping the house to yourself. The best place to get a refinance done is a small local bank that holds the loan, they have looser lending policies. If you want to get really creative you could take the hard money loan of 70000, then refinance with the bank at 75% arv into a home equity line of credit (HELOC) which would be $93,750 if appraised at $125,000, which would give you enough to pay back the hard money lender and have some bonus bucks left over, now that your house is remodeled it will qualify for conventional financing so you can refi the HELOC into a 30 yr fixed rate loan. You might have to call around to a few banks to get this going but I do it all the time minus the hard money so it is possible.