Need Advice on Securing Rehab Loan for Seller-Financed Flip

[Jay Martin]

Good afternoon and thanks for reading,

I have the opportunity to purchase my neighbor’s house (4 bed/4bath/2 kitchens on 3.28 acres of timberland adjacent to prime BLM hunting grounds) in Walton, OR (about 40 miles outside of Eugene) and I need advice on securing capital for the rehab budget of approximately $80k-120k.

Purchase price offered to me is $300k with a $50k downpayment and 5% interest with monthly payments and a 1-5 year term. 

I have the capital for a down payment and holding costs for a year but am struggling to find a lender who does not require a first-position lien on the home (the seller does not wish to subordinate his lien position).

It has occurred to me to seek a partner-investor who would profit share with me if I was responsible for renovations, as I’m an experienced and licensed Residential Contractor. However, this is not necessarily my preference.

Any thoughts, advice or brainstorms would be appreciated.

[Ty Coutts]

What's up Jay,

Given your situation, here are a few strategies you could consider to secure the rehab budget while respecting the seller's desire to maintain a first-position lien:

Home Equity Loan or HELOC:

If you own your primary residence or another property, consider tapping into its equity through a Home Equity Loan or Home Equity Line of Credit (HELOC). This would allow you to secure funds without placing a lien on the new property.

Personal Loan:

Investigate personal loans from banks or online lenders. These typically don't require collateral but come with higher interest rates. Ensure the monthly payments are manageable within your budget.

Private Lenders or Hard Money Loans:

Approach private lenders or hard money lenders who may be more flexible with lien positions. While interest rates might be higher, they can offer quicker access to capital.

Seller Financing Adjustments:

Negotiate with the seller to see if they are willing to adjust terms slightly. For example, propose a smaller initial down payment and larger monthly payments, which could free up some capital for the rehab budget.

Partner-Investor:

While not your preference, finding a partner-investor could be a viable option. Given your expertise as a contractor, you might find an investor willing to fund the rehab in exchange for a profit share or interest on the loan.

Cash-Out Refinance:

If you own other investment properties, consider a cash-out refinance to pull equity from those properties to fund the rehab.

I work for Aslan Home Lending and we have a HUGE variety of loan products, including the ones mentioned above. Please feel free to DM me if you would like to discuss your options. Even if I am unable to help, I could refer you to people who can. Hope this helps!