Rehab Financing, Hard Money Loan? Advice?

Question

I am soon to be closing on a property that my wife and I and our two toddlers plan to rehab and move into and rent out our current house.

We are looking at about $60k in Reno and updates.

Considering doing a hard money loan to finance the rehab.

Any advice? Recommendations? Would I do a loan for slightly more than I need?

Khara Brown · Answer

There are fix and flip loans available that may be an option for you

• Up to 85% acquisition/ 100% on rehab/up to 75% ARV
• Both revolving & non-revolving options
• Loans ranging from $60,000 to $10 million
• Rates from 8.5%-12.99% Interest only
• Origination-from 2.5-6%
• Up to 24 month terms available
• Acquisition financing
• Town homes, single & multifamily dwellings
• No prepayment penalties
• Closing: 10-17 days

Feel free to reach out to me should you need more options or information

Danny Webber · Answer

Hard money lenders typically will not lend to owner occ properties. Avoid them in this case anyway. If the house is livable right now do the repairs over time without financing if able. If they need to be done immediately and the ARV is there maybe purchase using HM and then do a RT refi into a long term note.

Buy-repair-refi

Corie Carpentier · Answer

@Jon S.

Hey, actually Sofi is who i have really been thinking about. The monthly payments just scare me, I did the "get my rate" thing and for the highest year and for a $50k personal loan the monthly rates were like $1200. How do you get the option for a 7 year, I think it only showed me a 4 or 5 year term.

Also can you tell me how your process usually works? Are you using them for rehabs then refinancing ?

Corie Carpentier · Answer

@Kevin M Finley

Hey, yeah the plan is to refinance ASAP when we get the rehab done and payoff the HML and hopefully be able to pull some money out to invest in the next deal.

Corie Carpentier · Answer

@Jarrod Covey

I'll holler at your guy, thanks

Corie Carpentier · Answer

@John K. Eck

Thanks for the info. I did look into the 203k and that was the original plan but they only finance $35k in repairs and take alot longer to close and get things done apparently.

Ill check into the Loan Ranger.

And I do have credit cards with high limits that I plan take advantage of as well to get reward points.

I hope your flip goes well!

Jon S. · Answer

I see someone mentioned a personal loan.  Sofi is a good option.  https://www.sofi.com  Super easy.  Funds in 2-3 days.  Zero fees or points.  No pre-payment penalty.  Loans up to 7 years.  I have personally used them three times this year for personal loans for investments.

Kevin M Finley · Answer

Typically hard money lenders will not allow you to live in a flip. FHA 203k may be an option but they are a nightmare.

If you're not going to move in until after the rehab, a hard money loan refi'd into a conventional may be your best bet.

Jarrod Covey · Answer

Hi @Corie Carpentier - Chris Motal at loan Depot is a great contact for alternative/construction loans. Their rates are below hard money and they move quickly. You can find his contact info at this link Chris Motal

Ken Eck · Answer

- What type of financing are you currently using for this new home?

- If you haven't yet,  have you looked into a 203k rehab loan since it will be O/O'd?

- Are you planning on living in the home long term after reno?

IMO I would shy away from a hard money loan for rehab on a property you are not going to flip. The rates and terms are not really conducive to O/O rehabs. It can be done but you can get much better rates and longer terms with a personal loan.

I'd reach out to a couple hard money lenders and discuss numbers. There are a number of them that should service your area, being between Austin and Houston. One in particular, as an example, I have contacted is LOAN RANGER CAPITAL, out of Austin.

In terms of a personal loan, there are also a number of banks that will allow for you to take a large (50k+) personal loan for rehab purposes and the rates will be upwards of 3-5 (maybe more) points lower than an HML . The terms will be much better too, up to 6-7 yrs from what I have seen. This would help you greatly reduce those monthly payments, but on the flip side you may end up paying more interest over the life-time of the loan, depending on the exact numbers and speed of pay off of course.

Another option is 0.0% interest Cash-Back or reward point Credit Cards.

As I am currently in the search of doing my first flip, I have done a lot of research on HMLs, personal loans and even using the above mentioned CCs to pay for the rehab portion of the flip, in an attempt to reduce out-of pocket costs.

Hope this helps!