Bridge/Construction or Conventional?

Question

I just contracted a house in a desirable location/schools that needs a lot of work.  We are not scared of that, but got the home at what we feel is a great price and we thinking putting $100k in it will soar its ARV / Rentability (we are going to rent it out). I have an option to do the regular conventional loan and pay out of pocket for the renovation. I was also exploring a bridge/construction loan that would allow me to borrow the $100k in draws and refinance upon completion (owing interest only in the payments). My fear is that while the interest rate is high it's understandable, but also the origination points are 2 for the lender and 2 for the broker (nearly $20k just in fees). When I refinance, I will likely have to pay that again and just didn't know if I am overthinking this (as those are taxable write-offs) or just go ahead and close once and spend my own money renovating. Anything I should be comparing that I am not thinking of?

Jamie Singleton · Answer

Lance...were you successful in acquiring a loan that fit your needs?  I have almost the same situation and examining loan options.

Devin Peterson · Answer

Lance,

Primary or investment as intended occupancy?

A lot of ways you can go about this to save on fees and points. Happy to get creative and connect.

Lance Dacy · Answer

Thanks so much! I know it's a lot, but I have to move fast, so it might be the cost of my learning this time. I feel like the fix and flip I am only out a max of $20k of my own money vs. regular the whole shebang until I sell.

Charles Carillo · Answer

@Lance Dacy

Spending your own money to renovate is probably the least expensive option, however, when doing a renovation project, I like to have extra cash on hand if/when the project goes over budget. I want to make sure I can complete the project 100% without any issues. If you have additional funds, above and beyond the $100k you have set aside, the conventional loan might work out best.

If you go the construction loan route, I would search out lenders directly by yourself. Speak to local banks and credit unions, private lenders, hard money lenders, etc., $20k in fees is crazy.