Need advice on buying an unfinished rehab SFR

[Ricardo Juarez]

Hi everyone. I'm 20 years old I've been following bigger pockets for a while and am ready to move on my first investment property. A property came on the market this morning and it looks like it could be a good opportunity. It is a  3/1 that is in the middle of a rehab but the owner ran out of money. (also the owner is the listing agent)  She already has gotten framing done for a second bathroom to go in downstairs. The property has a new roof, new siding, new windows, new front door, and new retainer wall. Most of the demo and frame work have been done inside as-well. 

The property is listed for $125,000 and has an ARV of $250,000. With that being said I see this as an opportunity to get in as an owner occupied, finish the rehab get it livable and rent out the extra bedrooms. My exit strategy would be to sell after a 2 year hold or hold on to it and rent out the rooms. (its located right next to a college).

I know that conventional loans are off the table. So would getting a hard money loan to cover acquisition and rehab be the best way to get in... until I can refinance  and start renting out the rooms?

I would love to hear what some of you experienced investors think about this?

Thank you!

[Mindy Jensen]

This could be an awesome opportunity, or it could be some great big red flags waving furiously.

She's started the project - did she pull permits for the property? Yes, means you can move to the next step. No means a red flag. 

If she pulled permits, has she had inspections for the projects that are complete? Once you own the property, YOU are responsible for bringing it up to code, so if she did substandard work, now it's your problem. With how much work she's already done on the property, if she didn't pull permits or doesn't have inspections she's passed along the way, I would walk away unless I was getting a super-sized discount. You could literally end up pulling out everything and replacing it. (I don't know your area, so I'm not sure of your laws. I just know a very strict area near me that will absolutely make you remove everything if you don't have a permit.)

Never trust someone else's ARV - always do the math yourself. How certain are you of that $250k ARV?

Since she is an agent, she literally CANNOT represent you. Get an agent to represent your interests. 

Hard Money doesn't lend to owner occupants. Private Money might. 

This isn't an absolute walk-away right now, but definitely move with caution and don't be so caught up in finding a deal that you overlook some major issues.