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Updated 2 days ago, 01/04/2025
Financing Strategies for house I want - Hard Money, Rehab or Conventional?
Hello,
I'm looking for advice on my offer strategy for a house on the market I want to purchase. My goal is to rehab it first then move in as my primary residence. Long term play would be to either use it as a short term rental or 1031 exchange it after 2+ years.
Here is some key information:
- Property recently hit the market and has 2 cash offers already
- The seller provided a pre-inspection report, which I shared with 2 different lenders, both think it may fail conventional financing due to potential structural and electrical issues (realtor thinks it could pass conventional)
- Seller has 100% equity but is behind on other payments (not sure of the urgency money is needed)
- This is my first attempt at an “investment” property so I’m new to this
I see 3 options
Move forward with an offer using conventional loan pre-qualification
-Not as attractive of an offer to the seller
-Possibility that appraiser calls out structural/electrical issues that need to be fixed before closing, effectively causing financing to fail
- Best terms and fewest loan fees for me
Use a rehab style loan such as ChoiceRenovation
-Even less attractive than a conventional offer to seller, but less risk of failed financing if appraiser calls out issues
-Slightly worse fees and interest rates compared to conventional
-Lenders tell me possibly up to 60-90 days closing in some cases, with red-tape for contractor requirements and draw schedules (sounds like the most hoops to jump through during rehab)
Use a hard money lender
-Most attractive loan option I can give to seller so I can compete
-Much higher fees and interest rate for me
-need to refinance into a conventional at the end of rehab (not familiar with seasoning periods but I think this is a factor as well)
Which option would you do? Would love to hear feedback!