Conventional Loan vs. Getting a Fixer Upper

[James M.]

Hey guys,

I'm new to this whole process, me and my wife bought a home maybe 6 years ago and its been awhile. We are in a position to buy a home and invest quite a bit of cash in real estate. Our end goal is to get to 5k passive income.

I'll skip to my concern/question. We are not ideally looking for homes to rehab, however the rehab homes could be some of the better deals for a buy and hold property. I'm not talking about needing a new rough, I just mean needing paint, clean up the house, replace carpet and other superficial things. We are still in the lender shopping phase and our current lender had told us previously that a house with a bad carpet or needing painting external/internal shouldn't be a concern.

Well fast forward and there was a house we were interested in. Granted, it had trash in the photos all throughout. It had bad carpet and it definitely needed paint. I verified with the lender to see our odds of passing appraisal. The lender told us no, they didn't feel it would pass. To be fair I wouldn't want to be in their shoes and give us a bad answer, I'd rather they be conservative.

So here is my question. If I am going for conventional loans and I am looking at houses with superficial issues, albeit a hefty amount, are there loans out there that align to that? Or am I stuck getting houses that are that bad (all issues at once I guess) through a hard money loan or some other means? I'm just curious if this is normal. A bad roof I understand, but a bad carpet/wall paint/trash? That is an easy fix.

It kinda sucks because it was a hell of a deal, but I didn't spend time going to see it in person since my lender said it'd be unlikely to pass appraisal.

I am in San Antonio for what its worth. :)