Are you looking for ways to finance your next rehab project? Here are some methods discussed below on how you can get it right.
While buying property using cash, you will encounter certain advantages and disadvantages. You are likely to get a better deal if you have cash at hand. It is common to find buyers making a cash offer even when they do not have all the cash, hoping that they will have gotten finance approval by the time of closing. As much as there are sellers who accept this, if you do not have the cash at hand by the time of closing, you are at risk of losing the deposit if the seller refuses to change the contract. Ensure that you have the cash at hand before making a cash offer to a seller.
You also have the option of a conventional mortgage to finance your next rehab project. However, at times, it is hard to find a conventional loan for rehab properties. You will find that they are cheaper, but it will take a while before you obtain one. This puts you at a disadvantage if the seller is unwilling to wait for the loan to be approved. You can opt for hard money lenders, which takes a shorter time.
Government Insured Loans
The 203k program from the Federal Housing Administration offers rehab funding to investors. The program, only available if you are buying properties occupied by owners rather than investors, lends both rehab funds and purchase price. However, there is the alternative HomePath Program from the Federal National Mortgage offering loans to consumers and investors.
You can also opt for owner financing since the transaction often closes quickly, and the seller hardly charges the fees that lenders do. You will also not require an appraisal, making this a favorable arrangement. Since most sellers are paid in installments, it is hard to find those who agree to this arrangement.
Hard money lenders will look at the property’s value and decide on the amount to give you for your rehab project. However, note that they will often lend you less- about 50 or 60% of the property’s value.
For you to qualify for a loan from private money lenders, they review your credit and borrowing history, among other things. Individuals with a good credit score will easily get a loan from a private lender.
If you are looking for money for your next rehab project, consider getting financing from KPI.