Need strategy advice

[William Gunther]

I purchased a home in the Midwest (purchase price $45,000) with an ARV of $150-160k) repair cost will be around $42-46k. My initial strategy was brrrr but I have a 12 year fixed rate on purchase at 4% I owe around $32k on it and if I borrow to finish property rehab, the current interest rates will kill my profits. I can repair property out of pocket if I stretch it over the next year or two, but that also incurs expenses. Would I be better off to just borrow to finish quickly, and eat the interest or just simply flip and resell in a couple years with hopes of market value holding up? I am a general contractor so getting the work completed in a timely manner isn't as big of an issue as funding. Thanks for your advice

[Mark Munson]

Hi @William Gunther

     If you refinance to borrow the rehab and payoff the current lienholder, that'll put your loan amount around $78,000. Assuming an interest rate of 11% (fairly average hard money rate at the moment), that means your monthly payment would be $715 at most (much less to start because interest is only paid on drawn rehab funds). If you can rehab it within 3 months, you may only make two or three payments on the loan. You will have closing costs and financing costs, but those shouldn't be that high considering the loan size. Hopefully that helps a bit, but feel free to message me if you need further guidance. Best of luck!