Need Lending Ideas?

[James Paisley]

I have a flip property under contract for $55k - in Atlanta, GA. Needs $70-$80k in rehab. ARV is an easy $220-230k based on comps in this neighborhood - likely more. Because the deal was so competitive, I would be buying this as a cash deal. Now I need to raise a portion of the rehab money. Is my best bet Hard Money? I've only done 2 deals before this. The first I had a partner, and the second was all cash, so I didn't need to raise $$$.

[Brad Stuteville]

Ok,  Here's what I'd do.  Since you already own the property many banks will (regardless of ownership length) treat it as a re-fi.  So, approach a local bank about a "cash out" (commercial) refi loan against the property to do "renovations and upgrades".  If you sell it right to them and (downplay that you just bought it) they should base everything on the current value.

The appraisal/evaluation is the wild card. Most banks want to be sitting at a 80-85% LTV so we would need a good appraisal to just cash out the fill 70-80K you need for improvements. If this happens, GREAT! You are done.

If the appraisal comes back lower I would treat this as a quasi-construction/ improvement loan. 

You can get a list of your proposed renovations to an appraiser and they can evaluate an ARV appraisal. The bank can then take that number an based on 80-85% LTV you should have plenty of room to cash out all you need. One benefit to this one is that you can also set it up as an Advancing Line of Credit so you make draws and only pay interest on what you are using.

Hope that helps!

Brad