financing for rehabs

I am a newbie to the rehabbing. have a little capitol saved and looking into this exciting field. one question for the more seasoned investors here…what is the best financing options for rehabs??? oviously your traditional home financing will not work via in some cases you almost pay for a house 2-3 times over w/ interest, not much profit there!!! can you approach a traditional bank about financing for rehabs or are bankers tend to shy away from these types for fear of their bottom line. If someone could give any advice on the most common rehab financing techique i would greatly apprieate it.

Typically you are either going to pay a private lender (family, friends, etc) or find a hard money lender. Expect to pay interest of around 10-12% for private lenders and 12% - 15% for Hard money with 3-5 points. Yes, the interest rate is higher, but you just need to build that into your purchase price.

reiauctions needs a better banker.

you go to the bank and ask for a non owner-occupied mortgage at 6.5% or whatever. ask for a 40 year amort. roll in the closing costs. the idea here is to get the CASHFLOW as low as possible for whatever time you are holding the property. In many cases you can get a loan to cover 90% the purchase price plus escrow for the repairs, meaning little cash out of pocket beyond the 10% down and carrying costs for insurance, utilities, etc.

2-3 times the purchase price in total interest is irrelevant because you are not holding the property 30 years. with luck you will rehab it and sell in 3-6 months. with luck.

Note, FHA has 6 month seasoning requirements for a buyer to use FHA financing to purchase your house.

Go to a small local bank and talk with the commercial lender. A bank with not more than a half dozen branches. You want to be able to talk to a decision maker and big banks do not have decision makers.

Best to have a biz plan. Let them know what you would like to do and develop a relationship with the banker. A relationship with a good banker will open floodgates of lending. Happy borrowing.


I donno how you plan on getting repair costs out of the lender, they will rarely agree to that. HUD does have a new Repair loan system, but you must occupy the property. If you want to rehab 2-3 homes a year … you may likely end up with 2-3 properties being carried at a single time. Having a lot of money tied up in repairs, down payments, and lots of loans on your credit prob. wont allow you to get many mortgages at a single time.

Actually, FHA only requires 90 days seasoning…


Scott Miller

I donno how you plan on getting repair costs out of the lender

you ask 'em.

any good lender will have a program for this. I’m not talking about FHA/HUD/gubm’nt loans.

I use a local bank. I established a great relationship with the head of the commercial department by taking a foreclosure property off their hands as my first deal with them. They now finance all my rehabs at 85% including all fixup costs. They also will refinance into fixed mortgage and give me my 15% cashout if I want to hold the property long term. Get to know your local bank. They can do things the large institutions can’t or won’t.