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You also figured In that it may take you around three months to fix and sell the home. Therefore, you will need to add in 3 months of mortgage payments or $2100.
Now the loan looks a little more like $142,100.
Is this Illegal?
No it is not illegal. There is no governmental law that state you can’t borrow over the purchase price of a home.
It can, however, be looked at as unethical. This is because many banks, lenders and investors don’t want to loan more than necessary because of course the higher the loan the greater the risk.
I must mention that this will only work if the contractor agrees to add the extra mortgage payments to the amount of the repairs estimate and the house can actually appraise for the value.
Method II
The second method is doing a “Joint Venture”. This is a great way to purchase a home using someone else’s money but reaping lots of rewards.
The way this works is you find an investor that is willing to use their money to help you purchase and repair the property. That is their only participation in the project.
You will continue to do your job which is:
- Find the home
- Hire the contractor
- Do the inspection with the contractor
- Supervise the construction job
- Find the buyer
- Split the profit 50/50 with the investor
This is a sweet deal.