Business funding
Rehab Loans
Financing for the property and the work, underwritten on what it will be worth.
General qualification guideline; lender and program requirements may vary.
Best forBuying and renovating a property, where the budget and the after-repair value are part of the deal.
Overview
Financing built around the finished property
A rehab loan finances a property that needs work, and the work itself. Conventional lenders look at what a property is worth today, which is exactly the problem when what you are buying is a house nobody would lend on. Rehab lending looks at the plan: the purchase price, the renovation budget, and what the property should be worth once it is finished.
The renovation money is normally released in draws as the work is done, not in one payment at closing. That detail shapes the whole project, so it is worth planning around from the start.
Benefits
- —Covers the purchase and the renovation in one financing structure
- —Renovation money is released against the work as it is completed
- —Underwritten on what the property will be worth, not only what it is worth now
- —Suited to property that will not pass conventional financing in its current state
- —Can be held personally or in an entity
Good for
Situations where it tends to fit
Property types and eligible scopes of work depend on the lender and program.
Documentation
What you will typically need
Documentation centers on the property and the plan for it:
- —Property address and details
- —The purchase agreement, if you are buying it
- —Your renovation budget and the expected value once finished
- —Proof of the funds you are putting in
- —Your plan for the property when the work is done
- —Entity documents if title is held in an LLC
- —Government-issued ID
Qualification factors
What generally matters
- —The purchase price, the renovation budget, and the expected value once finished
- —How much of your own money is going into the deal
- —Your renovation experience
- —The exit: selling it, or refinancing and holding it
- —Credit profile
- —Property type, location, and the scope of the work
- —Lender / program guidelines
Rehab programs vary more than most. How much of the purchase and the budget a lender will finance, and what it wants to see from a first-time renovator, differ from one program to the next. Tell us the project and we will tell you where it fits.
Common questions
Rehab loans, answered plainly
How is the renovation money paid out?
Typically in draws: the lender releases money in stages as the work is completed and inspected, rather than handing over the whole budget at closing. That means you need to be able to fund the first stage of work yourself and get reimbursed.
What is ARV?
After-repair value: what the property is expected to be worth once the renovation is finished. Rehab lending leans on it heavily, because the loan is secured against the finished property rather than the one you are buying.
Do I need previous experience?
Not necessarily, and first projects do get financed. Experience does affect which programs are open to you and on what terms, so it is one of the first things we will ask about.
Can I use this on a property I already own?
Often, yes. The structure changes -- there is no purchase to finance, so it is the renovation and your existing equity being worked with -- but it is a common scenario.
What happens when the work is done?
That depends on your plan. Some people sell. Others refinance into longer-term financing and keep the property as a rental, which for an investment property is often a DSCR loan. It is worth deciding which before you start, because it changes what makes sense now.
Got a project in mind?
A few quick questions about the property, the budget, and the plan.
The guidelines on this page are general guidelines only — not guaranteed lender approval requirements. Requirements vary by lender and program. TK Capital Solutions is not a lender; all funding is subject to lender underwriting and approval.