I just purchased a rental home with cash and am looking for money to rehab what are my options?

Asked by Cheryl D. Ware, Atlanta, GA Fri Nov 7, 2008

The house is a foreclosure.

Help the community by answering this question:

+ web reference
Web reference:


ATLHomeForSa…, , Atlanta, GA
Fri Nov 7, 2008
Hi Cheryl,

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)
(404) 437-0078

Specializing in investor properties, first-time home buyers, foreclosures, relocation buyers, and resales.
1 vote
Scott Godzyk, Agent, Manchester, NH
Mon Nov 10, 2008
Where you do not owe anything it is very easy to refinance it and get money out for repairs. you should meet with a local and trusted mortgage broker who will guide you through the process and with what programs are currently available to you. good luck with your rehab...
Web Reference:  http://www.ScottSellsNH.com
0 votes
Al Yelverton, , 30214
Mon Nov 10, 2008
There are a couple of other options:
- 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!
Web Reference:  http://www.alyelverton.com
0 votes
Tori Lawson,…, , Fayetteville, GA
Sat Nov 8, 2008
Hi Cheryl,

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.
Tori Lawson
Web Reference:  http://www.torilawson.com
0 votes
Lisa Allen,…, Agent, Roswell, GA
Sat Nov 8, 2008
Hi Cheryl,

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
0 votes
Dwayne Rouse, Agent, Lawrenceville, GA
Sat Nov 8, 2008
A hard money loan above a 65% LTV or even a refi will be tough. I route that I've personally found is to shop local community banks for a line of credit--BB&T actually had some aggressive packages that I didn't expect them to offer. Bigger banks pretty much slid to a halt on creative until January 09. Obviously like Lee said, it's going to depend on you. You'll need 720+ scores and decent collateral outside of the equity in the home you just purchased. The client I have purchases wholesale properties cash with a max of $20K a property and was looking to build his credit by financing them. A unique situation. He happened to be very liquid so he was able to obtain an line of credit.
Web Reference:  http://www.dwaynerouse.com
0 votes
Lee Taylor, Agent, Decatur, GA
Fri Nov 7, 2008
Two very good answers from Fabiola and Donovan.

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.
Web Reference:  http://www.intowninsider.com
0 votes
Donovan Stew…, Agent, CLIFFSIDE PARK, NJ
Fri Nov 7, 2008
Try to find a HARD MONEY LENDER. These are companies who's restrictions are not as stringent ie. as other bank's are. Also, if you can show sufficient Income, you may be able to get regular bank financing through your bank.

Donovan Stewart
0 votes
Search Advice
Ask our community a question

Email me when…

Learn more