Funding repairs with HELOC? Seller financing

[Jenna Stonecipher]

If I were to purchase a property with seller financing, would I be able to acquire a HELOC to fund the rehab? If so, would that still leave me the option of refinancing with the bank in a few years--effectively paying off the seller?

I've looked at other threads that suggested negotiating the seller financing in a way that payments would begin 6 months after closing, to allow for repairs needed. That may help.

Are there ways to finance the repairs needed that I am overlooking?

I could do it all myself, but it seems more prudent to take care of it all at once and start cash flowing as fast as possible.

[Robert Leonard]

It may be different for different borrowers, but mine is at 10.99%. I think it would be worth using, even if you just use it to purchase your materials for your project.

When you say HELOC, do you mean on the property that you are buying or something you already own? It may be possible, but I've never heard of anyone getting a HELOC on a property in need of a rehab. No matter how you structure your financing, there aren't any finance options that you might use today that would prevent you from refinancing in the future. Just make sure your seller financing is "with no prepayment penalties."

If you are trying to figure out a way to finance the purchase and rehab costs, that can be a challenge. The two primary options are get your purchase financed by the seller and come up with your rehab funds from some other source. Or if the deal is good enough that your purchase and rehab cost will be below 70% of your ARV, you might find an HML that would loan 100%. The HML option only works if you know you have a lender who will offer a refinance in 3-4 months after your rehab is complete.

The question you want to ask your lender is "what are your seasoning requirements?" How long do you have to own a property before they will do a cash out refinance? It can be any number. I've heard of anything between none with some lenders to 6 months with others. Not a personal experience, but I've heard of credit unions that have no seasoning requirements.