Here's my advice since I've actually purchased and rehabbed investment properties and am also a Realtor. The fact that you've already purchased the home eliminates that option of obtaining an FHA 203k rehab loan which would offer you rates much lower than a hard money loan since it is an FHA loan. Also, since you've already purchased the home, many hard money lenders that I know of probably won't want to finance the rehab since they will not be holding the mortgage and have a security interest in the property.
Those would have been your 2 most obvious options with the FHA 203k loan being the more cost effective choice since hard money loans are expensive and can charge anywhere from 10-18% interest and anywhere from 2-5 points. They would also require a nice down payment.
Therefore, my best advice to you would be to refinance the home using the equity in the home. Many hard money lenders finance anywhere from 50-75% based on the after repair value. However, the challenges I predict you going into is a lender who won't want to finance the property because you own it outright. Also, from your perspective, if you refinanced it means that you would now owe some debt on it based on the amount of the equity you took out for the financing.
That's why I also advice my investor clients to be as liquid as possible, keep your cash, and pursue the most cost-effective financing options.
Hope this helps. Let me know if I could help you beyond this.
Fabiola Fleuranvil, MBA
South Owens Realty (formerly Re/Max Marketplace)
Specializing in investor properties, first-time home buyers, foreclosures, relocation buyers, and resales.
- Get a loan secured by your savings or 401K
- Advertise for an investor that will loan you the funds for a short period (6 mo. to 12 mo.) secured by a Promissory Note or the property
The interest rate on the first will probably be very reasonable and the second will be much better that using a Hard Money Lender. There are some folks out there that want a rate of return better than bank rates or bond rates. Some investors pulled out of the stock market and have cash that they need to invest. Just be sure that the documents are clear and as air tight as you can get them. Good luck!
What is your budget on this home? If you are going to just rent this home out then obviously the budget should be lower than if you were going to occupy the property as your primary residence. If you have any way of coming up with the money outside of running up a pile of debt and/or crazy interest rates, then these are things to be considered.
Please advise if I can be of further assistance.
Most of the hard money lenders are out of business or if they are still around have such high interest rates that it wouldn't be worth it. So, depending on how much you would need for the Rehab I would suggest using your credit cards. I know that sounds out of the ordinary or even crazy it is probably your best option due to the current banking/credit situation. I think that now more than ever we need to think 'out of the box' and will actually get you the best rate on your money in town. Please don't hesitate to contact me should you need more help on this.
Good Luck and I hope this helps,
Lisa Allen, REALTOR
Prudential Georgia Realty
I would say that your options depend exactly on who YOU are.
Start with your personal network and seek loans from private sources and then explore hard money lenders and the stakes in their game.