Loan ideas needed, big fixer-upper

[Constancia R.]

LOAN IDEAS NEEDED. We have the opportunity to purchase for 96K a home with an ARV of 200K. The things we'd have to hire out are roofing, insulation and electrical.

What we'd like to complete ourselves are siding, flooring and kitchen remodel.

From the lenders we've spoken to, it looks like a licensed contractor will have to both provide an estimate AND do the work, which really cuts down on our gain. We've been presented two scenarios: 95% of purchase + repairs at a whopping 5% (and refi later, as rates continue to rise) OR one loan for purchase and they'd also give us a rehab loan.

With the contracted work plus DIY, we were hoping under 50K, maybe 60K.

We have great credit and are retired military. How can we best finance this without surrendering all of that control (and $$$) to a contractor?

[Jake Wiley]

I am sure one of the lenders here will have a concise answer, but I've been through this in the past as well.    For any big project, there is a real chance that the contractor would need to be replaced, or have independent subs do some of the work and I was never comfortable hitching my wagon to anyone with the bank.    

I kept talking to lenders until I found one that wanted to see several estimates from contractors, but we would be the ones that called for distributions and the money was released to us to then pay the contractors once the work was completed.   So, in essence, we were able to use the funds for the work we completed independent of a contractor as well as pay contractors and subs for the work they completed.     

In this scenario, we had to manage the float pretty tightly, as the bank would not release funds until stages were complete, thus no money upfront, however, in most cases we were able to use invoices for materials, etc that were on a short credit window to make it happen.   

As time progressed and we were stacking up more projects, I ended up becoming a licensed contractor, even though I sub everything out now,  and have great relationships with my bank so that these are no longer issues, but that is how I was able to start the flywheel.