Quote from @Kevin G.:
Hello everyone,
I am new to house flipping and have recently gotten into the game. I came across a home in the Bay Area that requires extensive work and essentially needs a full rehab. The home is essentially bare bones, with the wood being in good shape but requiring new drywall, flooring, a full kitchen rehab, a full bathroom rehabs, electric work, and repair of the septic system outside.
The total rehab cost is estimated to be around $150k-$200k, and I'm wondering if hard money lenders typically finance a deal that requires this much remodeling costs and still fund 100% of the rehab. The current purchase price is $185,000, but I would likely go over asking since this is what we are seeing in the Bay Area market, even for flips.
The ARV for the property is $770k, and currently it sits at 60% of ARV if funding the full rehab. Therefore, I believe this deal should pass a hard money lender's criteria.
Alternatively, would a construction loan be a better option, given that this project requires a lot of work?
Hello Kevin,
So for a construction loan what is your experience with you on title in the last 36 months? Most lenders would like to see a minimum of three projects with you on title in that time frame to assist you. If you don't have that experience on title you probably will have a hard time doing this.
I think private money or hard money or a fix and flip loan would be best for this scenario. They usually will lend to you but at a higher interest rate(for hard money and fix and flip loans) usually interest only for a duration usually for not more than 1 year. That will allow you to do the project and then later refinance to a more sensible loan with favorable terms and a lower interest rate.
Keep in mind: a construction loan will have the barrier of required experience. If you don't have it, you'll run into serious issues getting approved for a construction loan. Hard money, private money, fix and flip loans are possible ways to go about this that will help you. If these project will not last more than a year these are ways to go