Many times we make choices for our profession based on our emotions rather than on rational analysis of the growing trends in that society. Suppose! You have a keen eye to observe the changes in the financial cycle and the kind of opportunities for you in present scenario. Then you can decide to opt for real estate investment business. Here you are in property business and has also decided to acquire loan for the investment in it. Then I would like to give you a piece of advice, as to get Rehab Loan, for your decided hard money lender.
There is no need to be surprised over my suggestion as you have many reasons to go for Rehab Loan. Let me tell you about the two types of this loan category, for your own good. Rehab money is for the property, which you are going to rehabilitate. When it comes to financing that you need to find a funding source to actually acquire the property. Here comes a role of a hard money lender who can provide you with rehab loan, and you are supposed to take care of the funding source to actually take care of the rehab of the property so actually the work is done. When it comes to hard money lenders where you are going to find your money to acquire the property there are few lenders that will provide you with 100% financing, if you have decided to buy a right one with a margin of profit.
Here I would like to explain to you how this process of rehab loan works. Suppose! You are purchasing a property. Let’s say you buy a property for $100,000 and that property needs $10,000 worth of work so you are going to take 100,000 and that is what it is worth once property has been remodeled and rehabbed, all the work has been done to the property; it is worth $100,000 so it is an After Repaired Value(ARV). You take your $100,000, which is an After Repaired Value and you need to minus $10,000 which is your rehab cost is going to give you what is called an Adjusted After Repaired Value of $90,000. There are some hard money lenders that will lend 50% of that and there are some that will lend up to 70% of that. Would you like the lenders that will lend 70% of that? So if you take $90,000 times 70% is going to give you $63,000 which would be your loan amount.
If you are purchasing the property for $63,000 you are going to get 100% financing. If you are purchasing the property for $65,000 the lender will lend 63,000 and you will be responsible for coming to the closing table with $2000 out of your own pocket to acquire the property. When we talk about rehab money you got to purchase the property and you also got to get the work done to the property. Now for an example purposes let’s say that you are purchasing property for $60,000 and the lender can go up to $63,000. Is the lender going to give you extra money above what you are buying for and the answer is no; the lender will not. So you are going to be actually buying it for 60,000 the lender can go up to 63 you are actually going to get property loan for $60,000 when it comes to rehab money.
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