Financing a Rehab

I have a bank owned property that I am considering trying to buy. Details: The Listing price is currently 75K. The same house sold in September 2003 for 91K and the one comp I see right now is from May of this year for 110K. The house that sold for 110K hand a lot size about 35 sqf bigger, but the house itself was 150 sqf smaller and they were both built in 1954.

The average appreciation for this zip code was 10.7% last year and median price was 99.5K. I plan on confirming the comps and I need to get a close look at the condition of the house to truly get a feel for the value.

My major concern is how do I go about financing this purchase? I have enough equity in the home I live in curretly to get a HELOC (5.65% for 15 years if approved and I have about 100K equity) for the house and repair, but I am very concerned about going that route. Is there a better route that I should look at?

Thanks in advance

Howdy EricB:

A hard money lender may be the way to go. You can use the property as the basis for the loan and not risk losing your home. You can get 65 to 70% of the after repaired value and have money for repairs escrowed until the work is complete. The rates and points are steep but may be worth it to protect your home. If you are a great customer at your bank with CD’s etc you may be able to get them to loan the money but it is getting harder to do these loans with banks. The credit card return is better for them than 4 or 5 % on a vacant house in need of repair.

LOL, Merry Christmas

How hard is it to find a lender for a investment property? Do you have any that you might recomend?

Thanks for the help

Hi EricB,

This website has a listing of potential lenders for your investment properties. Just go to “Resources” and then go to “hard money lenders.” In Texas I’ve heard of William Lowe with Investwell. I go through a mortgage broker that deals with a bank in order to get me my rehab money.

Great thanks for the information on the HML’s, nice list to start with.


Is a “hard money lender” like an interim or construction loan?? Sorry for the stupid question.


An HML is just a source or type of lender, as opposed to a traditional lender (bank). HML’s are usually the people that offer “rehab loans” but some banks do to. I actually get my rehab loans from a bank that has much better rates than an HML, so it’s definitely worth it to shop around for the best loan. Before I did my first deal, I looked for a couple months and talked with a lot of people. Hope this helped.

I am in the same type of situation wondering how I am going to get money for rehab of a property. Using a hard money lender will be too expensive for this deal or atleast for me since this would be my first deal.

I am using a conventional loan for the house purchase. ARV is 85k-90k the purchase price is 50k. I expect 10k in repairs and holding costs for about 4 months. Avg days on market (DOM) is 90-120.

What ways are there to get that 10k for reapirs other than racking up credit cards @ 9% and unsecured loans with my bank @ 10%?

Hi Aramirez,

You might not be understanding how a “rehab loan” works. The lender, whether it’s a bank or HML, will loan you 100% of the purchase price of the home and up to 65-80% of the ARV. So if your house is ARV appraised at $85,000, multiply this by 80% and you get $68,000. This is the most you’ll be able to secure a loan for. Deduct the purchase price of the house ($50k) from $68,000 and you’re left with roughly $18,000 for repairs and other expenses. See how it works. Hope this helped.


Yes I understand how HMLs work, but with the points and all I figured ti would be pushing this deal. So I went with my credit union on a conventional loan with 5% down.

But as you are mentioning I guess some bank do offer ‘rehab’ loan programs. This I need to go ahead and search for on the web. I know with the property in question and my credit that I should easily qualify for $10k more than the purchase price of the house.


Risk your primary never!!!
there are plenty of deals that let you go 90% of ARV and if no major repairs are necessary you can get 100% financing. The problem with home equities is simple - several years ago I had a 200k line at almost 9 percent and the payment was rediculous. Then prime floated down to 4 percent i was sitting pretty and now in the past year its going up again. Its not a ride i like to take anymore.