Post Remodel Appraisals

[Joel Kleyer]

Interested in purchasing a 2-bed,1-bath SFH in Louisville, KY, to rehab the attic to create an additional bathroom and bedroom. Property currently is valued at $200K-$225K, but similar 3-bed,2-bath SFH are $300K. I'm looking at obtaining a construction loan to fund the purchase and rehab, then convert it into a traditional mortgage. The construction loan portion of the financing will be interest-only. While talking with a loan officer about it, he suggested to get the after-rehab appraisal 1 year after the purchase, so the initial purchase won't be used as a comp. This doesn't make sense to me because the home is being fundamentally changed from 2-bed,1-bath 1,050 sqft to 3-bed,2-bath 1,340 sqft. Would an appraiser use my original purchase to lower my ARV?

[Joel Kleyer]

Originally posted by @Raphael Collazo:

Do you plan on living in the home? If so, you may want to consider purchasing it using an FHA 203k loan. A 203k loan is "a type of home improvement loan program insured through the FHA that works by allowing homebuyers the ability to finance the purchase and costs of upgrades through one single mortgage." In other words, you'd be able to purchase the property and fund the rehab costs using an FHA insured loan.

The benefit of this approach is that it helps the borrower pay for the purchase price of the home, plus the cost of repairs. You would end up with one fixed-rate FHA loan, and a home that's in much better shape than when you found it. Hope this helps.

All the best,

Thanks for the suggestion, but I don't qualify for an FHA loan because I'm currently house hacking another property and it hasn't been 1 year yet.