Scenario 1: The house costs $16,000. You think fix-ups will take $20,000. You have $50,000 in liquid assets--cash in the bank, stocks you can sell for cash, etc. In that scenario (if you qualify) get the 203k loan. Rehab costs almost always take more than you'd expect. In this scenario, if you have an estimate for $20,000 in rehab costs, figure a minimum of $25,000. So you'd be spending $41,000 of your available $50,000 in cash to buy and rehab the place. That leaves you only $9,000 in the bank for all of life's other contingencies--anything from medical bills to losing your job and so on. That's not nearly enough. (A financial advisor can provide more details, but in no case is a $9,000 reserve fund sufficient.) So, if you could, getting loans (and a 203k probably would be best) would clearly be the best way to go. Nothing wrong with a personal loan, either. Just somewhat higher interest rates.
Scenario 2: The house costs $16,000. It's in good shape and, after a thorough home inspection it appears to need only $5,000 for some repairs, mostly cosmetic, to get it into the condition you'd be comfortable with. You have $150,000 in liquid assets. Some money in the bank. Maybe some in the stock market. Maybe you own a home you know you could sell for a nice profit. In that case, assume home repairs will cost $10,000. Your out-of-pocket costs would be $26,000. You'd still have $124,000 in liquid assets. In that case, it'd probably make sense to pay cash--though there'd still be nothing wrong with financing it. It's just that, in this case, you probably would be able to safely pay cash.
You probably fall somewhere in between. That's OK. But the process outlined above should help guide you in getting closer to the best decision for you.
Hope that helps.
WOW $16K for a home good luck
Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
Jack Gillis, M.B.A., J.D.
Jack Gillis Realty Advisors
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