Need Help with 203k Loan in NJ

[Daniel Ribeiro]

Hello BP!

As the title states, I have a question in regards to my options utilizing a 203k loan. I currently am purchasing a distressed rehab rental property in East Orange, NJ. The first set of contractors sent to the property provided a preliminary estimate of repairs in which they are quoting a total of $86,000. Please note, this includes: the roof, plumbing, electrical, HVAC, kitchen, etc.

We had another set of contractors who gave us a quote $130,000. Although we haven't received a preliminary estimate of repairs yet, we were told today that they would fix the property from top to bottom inclusive of roof, side paneling, plumbing, etc.

My question is: Should I take the route of the $86,000 in which the essentials are taken care of or should I take the route of the $130,000 in which the property is fully renovated? 

Note, regardless of choice the ARV would put us in the ball park of similar properties in the area. Additionally, since the $86,000 is being allocated to multiple projects around the property, the units will not be fully renovated but the rent be at market value. The $130,000 allows us to possibly raise the ARV significantly as well as raise the rent a bit over market value as the property will be fully renovated. My concern is the loan amount increases over $50,000. Both alternatives allow for the property to cash flow respective to their rent roll.

Any guidance would be greatly appreciated, thank you!