Finance and Renovate Investment Property

[Corey Byrum]

Hi! Big thanks in advance for anyone taking the time to read this. Please let me know if I can provide more specifics or numbers.

I have an opportunity to purchase a fixer upper in a relatively great location. The opportunity arises after a family member, who has a clean title and owns the home outright, let the property go down the drain. The family member needs the money now and is looking to rent as opposed to finance another home.

I'm essentially playing seller and buyer. I'd like to turn it into a year round rental. I'm willing to leave the property empty for a year to take advantage of owner occupied loans, if that's possible.

Here are my estimates..

Property: 1,355 sq ft, | 3br 2bath | 8,500 sq ft lot
Comps / ARV: 500-560k ~ 530k

Total Needed: 340-400k ~370k
Sale Price: 270-310k ~ 290k
Renovations: 70-90k ~ 80k
Severe cleaning needed (doing myself)
Severe landscaping needed, it's a jungle
I'd like to maximize potential value and be at the top of in-area comps, so would like to do a full gut

Cash on hand: 20k - 30k
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I'm considering,

- Seller financing + separate renovation loan
- FHA 203K (BRRR)
- Fannie Mae Homestyle Renovation (if down payment is below 5%) (BRRR)

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Seller Financing + Separate Renovation Loan

Pros:
Low down payment (via seller willingness) <= 3%
Low interest rate (via seller willingness) <= 3%

Cons:
I'm unaware of how I can finance rehab without a personal loan
Must cash-out refinance to obtain equity, conventional loan rate will not be as good

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FHA 203K

Pros:
Low down payment
Bundles rehab costs

Cons:
Higher interest rate than the seller financed loan
Must cash-out refinance in order to obtain equity and make an investment property

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Fannie Mae Homestyle Renovation

Pros:
Bundles rehab costs

Cons:
Higher interest rate than the seller financed loan
Must cash-out refinance in order to obtain equity and make an investment property

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I may be totally off on what would be optimal here but wanted to provide my current thoughts. Any feedback would be greatly appreciated! Thanks in advance.