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!

[Daniel Ribeiro]

@Ibrahim Hughes once received, will gladly share more information. When I refer to raising the rent, I refer to being able to charge on the higher side of market value as opposed to the median. Of course that cannot be guaranteed which is why the question is raised. Will keep you updated !