The Ugly House Hack: Renovation Loans for Instant Equity

Ah, Patriot Nation, what is the one home hack that savvy investors use all over the country right now to increase their equity day one? And what is that same home hack that you as maybe a first-time or second-time home buyer can use not only to build equity day one, but also to bypass the biggest obstacle in the entire home buying process, which is lender required repairs. What is that home hack, you ask? Well, those two beautiful words, renovation loan. The renovation loan is going to be discussed here. We'll talk about why you're going to want it, some of the advantages or dis disadvantages. So, if that's of interest to you, hit the like and subscribe, share with your family and friends, and let's kick off this rodeo right now. Hi folks, I'm Kevin Fagan. from the mortgage patriot on your side nestled here in the Hill Country above San Antonio, Texas, showing all you proud Texans and all you great folks all around the country. Another great one. Why is that? Cuz we're killing two, not one, but two birds in one video today. We're going to talk about how to create equity that wasn't even there when you signed the contract. Believe it or not, we're going to create equity just by the use of what kind of financing we're going to take. Also, we're going to solve the problem of the biggest obstacle you possibly have in a transaction and the one that makes things blow up and not get to the finish line is lender required repairs. We're going to show you how a renovation loan solve both those scenarios, making you money and avoiding problems uh just with this one loan technique. Hit the uh subscribe if you would please. Really helps me with my YouTube content. Brings my videos to the forefront. I've got a great library of informative videos that help you out. I'm just the loan uh patriot in the wilderness fighting all the big lenders. So, uh would love to help you and let's get into that content right now. Okay, as I get into why uh you can create equity right away with a renovation loan, let me first explain what a renovation loan is. And it's just a it's it's just a traditional mortgage loan that uh has two components to it. It has the purchase component and it has the renovation component. So, let's take for example, you're buying, say, a $250,000 house that needs a lot of repair and or needs a lot of fixes that you that you want to upgrade to. And let's say that amount is $50,000. So, your the renovation loan allows you to combine those two together, the 250 and the 50 into one loan. So, your loan is in effect two is $300,000. And what happens is the selling party gets paid off the $250,000 for the purchase. And that separate $50,000 goes into an escrow, an escrow account that's separate and that you can't touch, but your contractor can. And so the contractor will phase money out of that account as he as he or she does the repair work until you have a completed home. So that's the essence of a renovation loan is it's got again two components and in just one loan. and you're only paying in the in the case of an FHA, for example, three three and a half% based on 300,000. So, in other words, you're not going to have to come out of pocket for $50,000 for the renovation. It's inside the loan. Hope that all makes sense. Okay. So, how do you as a first-time home buyer or even a second time home buyer take advantage using a renovation loan to create instant uh equity in your home? So, let me give you an example. We're going to use the example of a 300 and a home that was all if it's all, you know, up to market standards would be $350,000, but it's got issues. Uh, and it currently is listed in the local MLS, the multiple listing service or on Zillow or Redfin or Realtor.com for $275,000. And why is that? Because it it's a 30-year-old home. It's never had a new roof, so it needs a new roof. It's got wiring issues. It's got uh carpet all throughout. It's got other updating lighting fixtures that are like fluorescent bulbs that nobody wants anymore. You know, it's got $50,000 worth of fixes required. So, let me show you the math on why a renovation loan would work in this instance and how you can pocket a quick $25,000 of instant equity. Let's look at the quick math on this. you're under contract on a $275,000 house and the neighborhood will tell you that if this home is up to standards because of the square footage of it and comparables in the neighborhood, this house is worth $350,000, but you got to do a lot of work. You need a new roof on a three 30-year new roof composition single is going to cost about $20,000. And you need new wiring, maybe a fuse box and other issues. That's another 5,000. You're at 25,000 in renovation now. You also need a new water heater. and you need uh the HVAC and the heater system is not working very well. Uh that's $5,000 together total. So now you're at $30,000. But you also remember you want to get rid of that carpeting upstairs and replace it with wood flooring. That's $10,000. Now you're at 40. And you want to improve your kitchen and put new countertops and maybe backspace. That's $8,000. And lastly, you want to get rid of those old long fluorescent bulbs and replace them with nice contemporary uh lighting fixtures. So now you're that's another $2,000. You're at $50,000 even. So on the purchase of 275 plus the 50 using your renovation loan, you're only coming out of pocket for three and a half% on $325,000. Not your $275,000 $35,000 FHA loan on 325,000 and um you are immediately walking into a home that once renovated is going to be worth $350,000. So, you've improved it just by renovating it, and you've only spent 50 to gain 75. So, you have $25,000 of magic equity that uh is going to work for you later down the road. Now is a great time to introduce webinar.orggpatriot.com. webinar.the mortgage.com. What is that? Go to that website and sign up for it. I have a once a month Thursday evening start to finish first-time home buyers essential roadmap. In other words, I'm telling you everything. How to start uh getting pre-approved for your home, negotiating with an agent, uh securing your loan officer, what to do, try to get under contract, uh strategies once you are under contract, how to negotiate the inspection report, taking you all the way to title work and what papers are important to be signed, everything start to finish from pre-approval to getting your keys. Uh it takes about 50 minutes, maybe sometimes an hour. We have a great time. It's fun. You're going to enjoy yourself. You're going to learn a lot. And you're going to see some of these things like how to how to write the lowest closing cost check at closing. Uh maybe the best down payment assistance program available to you. how to how to get an extra $1,500 off on your closing cost no matter what with a certain uh agent strategy and all kinds of strategies that are valuable to you. So sign up for that webinar.org mortgage.com and I'll see you Thursday evening. Okay. Okay, so you just created $25,000 worth of equity out of thin air using the renovation loan. Now, let's look at the second home hack aspect of the renovation loan. That is avoiding or or you know getting around uh lender required repairs. So, we said in our example that the home needs $20,000 worth of new roof. It needs $5,000 worth of wiring. It needs $5,000 worth of water cooler and HVAC heater systems. That's $30,000. If you uh get that under contract and if you don't use, you know, you get the inspection and you and you get an appraisal and you're not using a renovation loan, somebody is going to be responsible for that $30,000 worth of work. Why? Because that's those are safety issues. The roof, the wiring, certainly the HVAC, and the water cooler is all uh safety issues. So, the lender is going to require somebody to pay for those. And the sell the sellers are saying, "Hey, we can't pay for them even if we wanted to." Besides, we lowered the price in accordance knowing that those need to be fixed. And you're like, "Well, that's great, but I can't come out of pocket for additional $30,000 at, you know, after closing to fix these items." Ah, so the renovation loan fits the need. So, not only again are you creating $25,000 worth of equity, but you've now set aside, remember $50,000 into your escrow account to fix those very items and to also give yourself some new flooring and new uh kitchen counters and some new lighting. So, you're getting the things fixed that the lenders required and you're customizing your house in the nature that you see fit and that you desire. So, it's a perfect solution to everything. creates equity for you and avoids lender required repairs. The renovation loan does it all. Watch these two videos that kind of dovetail into the topics we talked about today. The first one is uh the best renovation loans in 2025. The second one here I did recently is the biggest mistakes homeowners can make in 2026. So both those videos will educate you and help you understand why the renovation loan really solves a lot of uh key issues. And lastly, go to webinar.theort mortgage.com and hopefully I'll see you on Thursday and the next time that I have the seminar. You're going to learn again all kinds of wonderful things. It's really essential uh first-time home buyers roadmap covers all kinds of grounds that you're going to want, lowest uh cash to close, best uh down payment assistance programs, how to improve your credit so you can get a better rate, on and on and on. So hopefully you can join me there on Thursday. I'm the mortgage patriot Kevin Fagan on your side. Make it a great one. END OF TRANSCRIPT