Rehab Financing from Unexpected Sources

I just finished putting $12K into a condominium rehab. Not too unusual for me, because I often spend between $6K and $12K to rehab a foreclosure property that I am adding to my long-term rental portfolio. What was different about this project, is that a little over half of my rehab cost for this project was 100% financed by my contractors/suppliers – unexpected sources of rehab funds.





I had received a $2048 floor covering estimate and was prepared to accept it (and give a deposit) when the flooring contractor told me about a company promotion – no interest, and no payments due until January 2004. I can pay the bill anytime in full between now and January 2004 without incurring a financing charge or I can treat the bill as a revolving credit account and carry a balance with interest charges after January 2004.





The water heater, heat pump, and air handler in this unit were obviously in poor condition and would soon need to be replaced. I decided to just go ahead and replace these items as part of the rehab project. When I contacted the electric utility company about putting the utility bill in my name, I asked if they offered discounts on equipment purchased through the utility company. Since the 14 year old water heater had a label on it that said to contact the utility company if the unit needed to be replaced, I just assumed that the utility company would order replacement equipment and contract the installation for me. I was pleasantly surprised when I was told that the utility company would not purchase and install the equipment I needed, but that they would finance the purchase and installation at 5.088% on a 5-year amortization.





The only requirement was that the utility company had to do a free sizing assessment for my unit, and the contractor I hired to do the work had to be on the company’s list of approved contractors. I submitted a proposal for $4369 that the utility company approved. When the work was completed, the utility company inspected the finished installation and wrote the contractor a check for payment in full. I will have about $82 added to my utility bill for the next five years until this loan is fully paid.





While the rehab project was underway, local residents stopped by to see what was going on. One of these visitors liked what he saw and asked to rent my unit beginning the first of next month, even though my rent is $50 higher than the rent he is paying for the same size unit. Looks like I will have rental income before I have to start paying all those financed bills.

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