Help with Financing a Renovation Only

[Steven W.]

Biggerpockets Family,

Good afternoon and I hope you are all doing well. For the last 5 years I've followed a pretty standard method for buying my rental properties and performing the renovation. It always looked like this:

Step 1: Buy the property under a conventional mortgage with 20% or 25% down (depending on type of property)

Step 2: Apply and use a FHA Title 1 Home Improvement Loan to renovate the property. This has always been a great loan that doesn't require any equity in the property and is low cost because it is factored over 20 years.

Step 3: Refinance the property and pay off Title 1 Loan.

Step 4: Rinse and Repeat

Unfortunately when I tried after my last acquisition I was told my DTI was too high. This is because the underwriter won't consider my rental income on properties I've owned for less than two years, even though I have leases in place!

Well this puts me in a difficult position and I need about $65K for the renovation. I was hoping that the BP community could help me on some ideas or companies you've used in the past to fund just the renovation piece.

So far I've looked at Lightstream however they seem to be a higher interest rate and max loan term is 84 months. I've also called a few places about a personal line of credit, but again higher interest rate since there is no collateral. 

What have you used to fund your renovations? Please exclude any loans that would require me to refinance the property under a hard money loan or a 203K loan. 

Thanks for the help!