Going for my first rehab property, looking for advice.

[Sergio Baerga]

Hey bigger pockets members. I have been here for a few months now reading the books watching the videos listening to the podcasts, etc. Almost closed on 2 deals but fell through (but learned a lot during both experiences)

I am stuck in this situation, and as I am new to this and I would appreciate any help or advice given to me. I am even willing

After running the numbers on different properties over the past few months I came across a property that works on the calculator. 

I have a certified contractor with experience and a large team who is down to do the work. 

I currently have $120,000 saved cash. 

Im having issues with financing. I have 800 credit and minimal debt and income over 6 figures. Low debt to income ratio. 

The property is being sold for $100,000 and the renovations will run me $160,000. Great location was being built and left incomplete. It is a 4plex, but supposed to have 2 units on the top to turn it into 6 units. (my contractor will build the 2 extra units on top)

I can get 6 units out of this investment at $850 each unit. 

BANK SUMMARY SO FAR

(#1 I live in Puerto Rico) Some lenders will not lend because of this. Some banks lend in P.R. as well as states. 

I have one bank who will finance me the $100,000 but not renovations. (about 10k closing and legal fees and 5.5% interest)

I have one bank who said if I buy the house cash and they will loan me the renovations. (5.5% the total amount loaned  plus 6.5% interest monthly.  

My main property is worth $330,000 and i have $160,000 equity on it. (In PR my bank will not do a home equity line of credit, only refinance the entire house which will run me over $10k in closing costs)

I keep reading on how the ideal situation is to pay as low money down as possible. 

Can someone shine light as to how to go about making this happen, I see that it is a little complicated for a first deal however the contractor is great and giving me a good deal on the rehab. 

Thank you for reading and any input, reading recommendations, or advice, or leads would be greatly appreciated. 

[Jeff Copeland]

Your least expensive option will probably be to pursue a HELOC. It does not need to be with "your bank" - I imagine PR is tricky, but shop around and you may find a bank willing to do one on your primary.

Otherwise, I would lean towards financing the purchase, and bootstrapping the rehab. 

Your statement "I have one bank who said if I buy the house cash and they will loan me the renovations" makes me nervous. Banks are notorious for saying "Absolutely, we'd love to loan you the money!", then coming back after weeks of your time and mountains of paperwork and saying "We're really sorry, but underwriting said no to this one".  

Better to find that out before you sink $100k of your own cash into an already stalled project.