Have a lot of forclosers in my area, I would like to make offers on some, buy, rehab,sell on a lease-option or Owner finance. I have a local bank that lends to many investor in my area they have a construction type loan that will cover the purchase and rehab. Afterwards you can re-finance and have a conventioal loan. My problem is I really can’t offerd to make monthy payments and the other holding costs until the rehab is competed. I do have quit a bit of eqiuty in my personal res. I am considering re-financing that and keeping the extra cash as a reserve to use for short term holding costs. any thoughts on this approch?
My thoughts: Obviously the numbers have to work - that’s first and foremost. As far as tapping the equity in your home is concerned… I just did the same thing with an equity line up to 90% of the value of my personal res. The rate is prime (8.25) One of the other nice things about accessing capital this way is that there’s no (or very little) closing costs.
I agree with a using a home equity line instead of refinancing. It gives you better flexibilty to have the cash when you need it and pay it back when you don’t. If you pull out cash in a refi, you are very likely to use it for other purposes than your investing.
Many lenders will factor interest as part of the construction cost and fold it into the loan, assuming that the LTV permits.