ive seen a few threads where rehab investors would get cash out of closing as an allowance to do repairs. i need help understanding if theres a difference between a rehab loan and a construction loan. which would program would be best suited for a minor fixer such as floor, paint, kitchen, cabinets, appliances, bathroom, labor? also how do "contigency funds" or "draws" work? if youre doing an 80/20 loan, can the 1st or 2nd be used as a HELOC immediately after closing to be used for repairs or to leverage another property?

fictional scenario
3 month rehab
3-6 months remarketing
$575k purchase price
$700k comps
$75k rehab costs/remarketing costs/holding costs

thanks in advance

From your previous threads I certainly hope you are not representing yourself as both a Real Estate Agent and a Mortgage Broker/Lender.

I would summize from your recent posts you might want to sit for a few Mortgage Lending classes (Many are offered and/or required by State Lic. Boards).

The reason I say this is the questions you continue to ask, would lead any experienced RE or LO to equate you as more of liability than an asset on a transaction.

Have you decided on what your ultimate goals are in your chosen profession? From someone who has been in the RE Profession for over 13 years, i would suggest picking one side of the transaction or the other.

A majority of people who try to be the RE Agent and LO quickly find out that once you drop the ball on even one buyer while performing the financing , it can lead to a very dry pipline very, very fast.....

As some one who has been in the real estate profession for 13 years I think your user name is pretty embarassing. ChrncMstrbtr is not the name that suggest you have anything useful to say.

Alvin has posted some great threads, and I commend the fact that he wants to learn the business inside and out. We all had to start somewhere, and this forum is a great place to get answers from. If you truly have been in the industry fo 13 years you can probably agree with me that whne you started there was nowhere like this to turn to ask theses questions.

I will agree with you that it is difficult to be all parties to the real estate transaction. It is probably more counter productive if anything. Hiwever I think it's great if a realtor, loan officer, Insurance agent appraiser or customer wants to know the specifics.

ChrncMstrbtr,
thanks for your response.
no im not gonna represent myself simultaneously as an RE/LO. its either i do one or the other for individual transactions. if im doing the RE side, then ill have a collegue doing the LO and vice versa. if im buying my own personal investment, then im doing LO so i make sure i get the best loan program. personally i think being an RE and a LO would be more of an asset than a liability. not knowing the mortgage industry and knowing predatory lenders exists, leaves me vulnerable as a client and as a professional. i feel i would have more credibility educating myself with the different loan programs out there. this is the remaining puzzle piece that i need to complete.

my main niche is investments whether its residential or commercial. reason why i want to learn more about the mortgage industry is because its all about numbers and money. i kinda wished i started off in the mortgage industry first and learned conventional financing before doing RE.

eventually my ultimate goal is to become a broker so i would need to learn this in and out just as TN Mort Broker said. this is how im building my business, not as an independent contractor. im still young so this definately will take time/experience.

lets keep this on track to my first post.

TN, you are so diplomatic I love it

TN,
Feel free to skip my post if a screen name on a public message board is how you judge content. While perception may be reality in our profession, I would suggest not applying that same logic to the vast space we call the internet. Might just find out those with prestigous screen names are the same individuals being caught by those dateline cameras.

Chronic, good reply (+= I like the dateline camera line

To answer your question Alvin. Most rehab loans that I do for investors are the hard money type. 65% of the rehabilitated value. So assuming your scenario of 700K comps pertains to the finished product at 65% you would get a loan of 455K. Not enough to even cover the purchase price. Construction loans are typically for new construction purpopes with a general contractor who agrees to take the money in increments as different phases of construction are completed. It sounds like the way to do this deal is to take out 100% financing for the full price (better be in decent enough shape) then take out a second mortgage with a lender that doesn't require seasoning of the home to pay for repairs

thanks greg
what about a rehab loan? is this the same as the 203k program? when taking out a second mortgage, youre referring to a HELOC right?