Posted by jafon on December 25, 2005 at 11:27:49:
Which bank was this that did your financing?
Construction loan for rehab? - Posted by Tim
Posted by Tim on December 20, 2005 at 11:11:14:
All,
There is a property I am looking at buying that needs about 200K in rehab and I could purchase it now for about 175K.
The projected retail value after rehab would be between 700K and 750K based on the rents that we could get after the work is done.
How could I finance this? We started a LLC and would like to run the financing through that but could we get the entire 375K to cover the purchase and rehab costs?
Thanks,
Tim
Re: Construction loan for rehab? - Posted by Brian (WA)
Posted by Brian (WA) on December 20, 2005 at 14:33:23:
Tim,
Usually you would need at least two years showing a profit to be able to finance under the LLC.
One way to finance this is with a rehab loan which is treated much the same as a construction loan.
Another alternative, if you already own a home and have substantial equity is to refinance into a first lien position HELOC. I have been doing them for people and can get as low as prime minus 1.25%.
The advantage to doing this is control and flexibility. You won’t have to follow the strict guidelines of a rehab loan. If you are going to sell the property for quick profit you can pay down the HELOC and have it ready to use again without having to go through the loan process. For the next project you could essentially become the underwriter, appraiser, funder etc…
If you are going to hold it long term you can refinance after the rehab is completed to pay down the HELOC and again have the money ready for your next purchase.
Brian
Re: Construction loan for rehab? - Posted by Ben Carmona
Posted by Ben Carmona on December 20, 2005 at 13:16:09:
Hi Tim,
Is this an owner occ. or investment?
Were you planning to hold the property long term?
How soon do you need to close?
Credit, income, and assets will determine if you can get a conventional rehab loan.
A HML could be used as well. Quicker and easier but more expensive.
Ben Carmona
Re: Construction loan - Posted by Matthew Giegerich
Posted by Matthew Giegerich on December 20, 2005 at 12:11:03:
Tim-
Need more details. Contact me to discuss.
over 9 yrs experience as investor/ lender.
Re: Construction loan for rehab? - Posted by Tim
Posted by Tim on December 21, 2005 at 07:43:36:
Investment
No, just about 6 months
Need to close in about 1.5 months
Re: Construction loan for rehab? - Posted by Nate-WI
Posted by Nate-WI on December 24, 2005 at 05:51:52:
Tim,
In my opinion talk to some smaller banks in your area. I’m putting my first rehab deal together and from a small bank in town here I’m getting a 9 month construction loan, 7.25% interest with interest only payments, and 1.5 points for their work. 100% financed and purchase price and rehab money rolled into one loan. All this and its got to get done by the 18th of Jan. My lender said no problem at all in getting that done. Food for thought,
Nate-WI