Stuck on Financing for Live In Flip Renovation

[Chris Trupiano]

Hello BP,

This is a problem my parents have run into with their property in Suffolk County, NY (zip 11764). They purchased a water front property at a great price for cash (from sale of previous home) but are having trouble lining up the financing to do renovation. Their intention is to renovated it first then live there for an uncertain number of year (probably less than 5). I wanted to see if anyone from the community has additional insight or sees something we've over looking. 

The home is a waterfront 2 bed 1 bath, but not currently in livable condition. The structure itself has no issues, but there is no source of heat, and the water has not be turn on for a few years. Other than that the property itself isn't in too bad of shape despite being vacated for around 10 years. They own the property free and clear.

They've run into problems with financing for a few reason: 

1. For a cash out refi or heloc, the property is not currently livable so will not pass an appraisal. I'm unsure of the cost to do this, but the house is not in terrible shape.

2. There is an open permit from the 60s for a deck that was never closed. The previous owners ended up adding an entire closed addition, so closing this permit might require the addition to be destroyed, or raise the taxes a large amount. They'd like to avoid either scenario.

My thought is to have them spend the money to get the house livable (adding a means of heat and turning the water on, dealing with any issues that brings) then pass an appraisal and get either a heloc or cash out to fund renovations. 

What would you suggest in their position?

[Scott D Burrows]

@Chris Trupiano

I would try using the phone book and calling all the small banks in the area and just ask about their appraisal process for HELOC's.

Try asking these questions 

• Does your bank do HELOC's on waterfront property
• Do you do drive-by appraisals? Just let them know you haven't done improvements yet, so not interested in drawn out appraisal process. 
• Make sure the appraisal isn't more then $500- way too much for a HELOC appraisal.

Some larger lenders may actually have more lenient appraisals due to the volume that they handle, maybe? 

Hope this helps! 

-Scott