What are my options for financing a gutted fourplex to rehab and then sell?
Details:
Price: Asking $110, would like to buy for $90k
Work that needs to be done: Everything. Gutted to studs. Out of state owner wants to “negotiate” a deal (their word). Initial guess is $50k for rehab (2 bed, 1 bath units - about 3400 square feet total space), but better estimates to follow tomorrow. We plan to do some finishing ourselves to save on costs.
ARV is estimated at $195,000 and rents would be $550-575 per unit.
I do not want to buy and hold because this property is not as close to us as I would like our rentals to be, but the profit would be nice to invest into a closer property.
My question is: What are my financing options? My credit score is high 700s (as is my husband’s score), but we are self employed, so we have chosen to do stated or no doc loans in the past without any trouble (just usual loan PITA stuff).
I want to use OPM as much as possible, but we do have plenty of reserves for carrying costs and other expenses. I would rather not take cash from our business, but I can if I need to. This isn’t a case of, “I have no money at all, help me buy,” but rather that I want to create a deal that uses as little of my cash as possible (isn’t that part of the beauty of real estate? :D).
I am still feeling out the seller’s motivation level. They have owned the property since 1991, but obviously they have not had tennants for a bit due to construction that hasn’t been finished (not sure why yet - but I will find out). Since this is Christmas weekend, it is hard to reach agents (understandably).
Should I be looking for short term financing of some sort? A rehab loan? Just a plain old conventional loan? The seller may be willing to carry back some sort of financing, and if so, what should I be asking for from them? I have read tons of books on this stuff, but I can’t turn the page here and find out what to do on this deal to have the best outcome. I would hate to screw up my first deal.
Any sage advice would be great.
Thank you!
Laura