Seeking Advice on Financing a $20K Renovation for Investment Property in Michigan

[Luca Giani]

Hello,

I’m currently looking for advice on financing a $20,000 renovation for an investment property in Michigan. The property is not owner-occupied, and I have good credit as well as some equity in the property. The work is necessary to improve the property's value and cash flow potential.

I’m considering a few different financing options but would appreciate insights from the community on what would be most suitable for my situation:

• Personal Loan: Given that my renovation budget is $20,000, I’m wondering if a personal loan could be a feasible option.

• HELOC: If available for investment properties, this could be a good way to leverage the equity I already have in the property. Any recommendations for lenders who work with investment properties in Michigan?

• Hard Money Loan: I’m open to hard money lenders, though I’ve heard that they can have higher interest rates. Would a loan of this size be reasonable for this type of financing?

• Cash-Out Refinance: Not sure if this would be worthwhile given the size of the renovation, but I’m open to suggestions.

I’m looking for something that will be fast, with reasonable terms. Ideally, I would like to avoid refinancing my entire property unless it offers a clear benefit.

If anyone has experience with these types of financing options, especially in Michigan, I’d greatly appreciate hearing your thoughts. Additionally, if you know any reputable lenders or services in Michigan that provide these financing options for investment properties, that would be incredibly helpful.

Thanks in advance for your time and assistance!

[Katie Smith]

Hi Luca!

Sounds like you're being really smart about weighing your options. Since you have good credit and some equity in the property, a cash-out refinance could definitely be worth exploring — especially through a DSCR (Debt Service Coverage Ratio) loan. DSCR loans are designed specifically for investment properties and focus more on the property's rental income potential rather than your personal income, which can make qualifying much easier.

One thing to keep in mind: for a DSCR loan or traditional cash-out refinance, the property will need to pass a 4-point inspection (roof, electrical, plumbing, and HVAC systems). If any of the renovations you're planning involve these areas, it's important to address them before closing to avoid any delays.

Out of curiosity, what specific renovations are needed? If it’s mostly cosmetic (paint, flooring, kitchen updates), you’re fine. But if it’s more major (roof, HVAC, electrical, plumbing), those would definitely need attention first.

Also, while a cash-out refinance could cover your $20K renovation, you could also pull additional cash out to reinvest into future properties and grow your portfolio faster. A lot of investors use this strategy to scale without always needing fresh capital.

That said, just a heads-up — most DSCR lenders require a minimum loan amount of $75K, and some have minimums of $100K. So you'll want to make sure the loan size makes sense based on your current property value and the amount of equity you can access.

While a personal loan could work for $20K, rates are usually higher and terms shorter than real estate-backed financing. HELOCs on investment properties are trickier to find and might carry variable rates. Hard money lenders would finance it, but for a smaller project like this, they might not offer the best terms.

Happy to help if you have more questions. Lets connect!