First Time Homebuyer Funding Fear

[Scott Vaeth]

Found an investment property where the location is great and comps are strong. However, the home itself is priced on the higher end of my price range and will require $80K in rehab costs according to the seller who is an investor himself.

A few low ball offers were already declined, and I'm not sure what those offers were. Currently houses on the street are comping for $60K-$90K higher than what it's currently listed at but it's been on the market for some time. I'm thinking about putting an offer that's $20K-$30K less than asking since I'm coming in with only 5% down. The seller doesn't need to sell the property right away so I'm hoping to tread carefully. I'll be living in it for 6-12 months as my primary residence, but would like this to kickstart my long term holding strategy in the future and rent it out. 

Here's the catch.. I don't have the funds to cover the rehab costs and mortgage payment. I'm talking to a lender my agent recommended who offers rehab loans that are tied to conventional loans and I only need to put down 5%. It sounds similar to the HomeStyle Renovation and CHOICE Renovation loans, since the rehab loan is based off the ARV, not the upfront costs. Are my other options for funding this? If this gets approved, I'm hoping to work with the general contractor and do some of the repairs myself. While I know private lending exists, are there any other loans I should consider? Any help is appreciated!

[Scott Vaeth]

Thank you everyone for the tips! I don't want to overleverage here and spend more than I can afford. After receiving the pre-approval letter, I can confirm that the $80K is out of range. However, the seller's rehab estimate included updates I don't think is necessary to take care of right away (extending the size of the master suite, knocking down non-load bearing walls, and replacing all the flooring even though there's nice hardwood floors across most rooms). While it may not be the most economical strategy, is it worth submitting an offer and see what the inspector/appraiser comes back with if it gets accepted? The comps on the same street are $80K-$100K higher than the purchase price and I think location is a big reason why. A bit risky of a strategy, but if I structure the offer with $0 termination fee and the necessary contingencies, I wonder if it's worth finding out the actual costs then.  

Note: I'm not going to purchase anything that I know I can't afford, but the goal would be to BRRRR the property after living in it as my primary for a year.