Question: I've recently begun shopping for a second home in my neighborhood as an investment. The plan is to buy, fix and sell the property in a short period of time. The house I'm eyeing is just down the street from my home and could hold $20,000 to $30,000 in profits after repairs and improvements.

The problem is, I can't figure out how to pay for this property. I just closed on my existing house (my first home purchase) in May. I've renovated it and added roughly $20K to the value, but because I've owned the home for only three months, no lenders are willing to give me a loan based on that equity. I was planning on using this equity for repair costs on the investment home.

I currently have one renter living with me, but he doesn't pay enough to help me qualify for the $180K I need. Are there any creative financing options available to me? I've heard a bit about seller financing and private mortgage companies, but I know little about them. I have about $5,000 in cash.

-- Rich, location not provided

Rich: Even in today's overheated housing market, becoming a real-estate mogul overnight is harder than it looks. I asked a mortgage banker and a mortgage broker about your situation. Both said they couldn't see how you would get a mortgage for this second home, even if you have a good credit score and a steady job paying $50,000 a year. You've told me you made no down payment on your first home and have taken out an interest-only loan on it. So you have no equity in the home other than the presumed value of your improvements. Improvements, however, don't always translate into a higher resale value.

James B. Nutter Jr., chief executive officer of James B. Nutter Mortgage & Co., Kansas City, Mo., told me a lender would look hard at all the payments you would be making each month on both properties, including the loan payments, taxes and insurance, plus any other debt you may have. With your income, it probably would be hard to carry two loans. What's more, he says, a lender would insist on a sizable down payment for a house that wouldn't be occupied by the owner. Such loans are considered much riskier.

Jane Hostvedt, a vice president at Puget Sound Mortgage Brokers in Puyallup, Wash., and this year's secretary of the National Association of Mortgage Brokers, says she doesn't think she could find a mortgage lender to finance you, either. You might designate the second house a rental property, but a lender would want a down payment of at least 10% in that case, she says.

In seller financing, the seller of the home lets you pay for it in installments over a set period of time. But the seller can do that only if he owns the home free and clear. If the seller has a mortgage, he normally has to pay that off when he sells the house, and he would probably need your money to do that. Still, it wouldn't hurt to ask the seller if he's game.

Another option, Ms. Hostvedt notes, would be to ask a rich friend to lend you the money. Of course, that could imperil your friendship.

Mr. Nutter suggests you might ask for a short-term construction loan from a bank, if you have a good relationship with a local banker.

As for me, I wonder about your basic plan. You're assuming that you'll be able to sell the home quickly for a profit after you make some improvements. But there's no guarantee the housing market will be as strong in a few months as it is now. You could find yourself carrying a big slab of debt much longer than you planned.

-- Mr. Hagerty is a staff reporter for The Wall Street Journal. His "House Talk" column appears most Fridays on RealEstateJournal.com. E-mail him your questions about the residential real-estate market. Please include your first name and city and state. If your question is answered and posted, we will show your first name and city. Due to volume of mail received, we regret that we cannot answer every question.

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