Rehab costs IN the mortgage...
I know I've read on here before that you can include your rehab costs in your mortgage when you buy a property. Need advice on this plz. Pluses and minuses of it. How does it work?
Thank you all!
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and if it doesn't, you need more an additional exit strategy. The short of it, is that you owe the ENTIRE balance of the loan on day 181. Hence the risk. Investment loans aren't considered long term loans. they're short term loans. No flipper wants to get a home, rehab it, and hold it for 5 years before they sell it. So... obviously, your taking a risk purchasing a property on whats traditionally referred to as a ballon loan.
For me, I analyze each property for both its ability to earn money in a Flip, and to cash flow as a rental. If it meets both rules, and is in my farm area. I make an offer.
Now, I usually like to complete my rehab NLT than day 90. I list for 6 weeks, and around the 45 day mark before my loan is due, if I don't have a contract, I move to a 5/2 20yr ARM, for the next 6 months and rent it out, to cover costs and cash flow, and THEN at the 12 month mark, I refi AGAIN, because my 5/2 ARM isn't a really a REFI because its "in house" and take cash out, to the point where im still cash flowing a min of 250.00/mo. Usually ends up being about 20k