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Rehab financing can be an excellent tool that allows an investor to
leverage existing cash in order to take advantage of real estate
opportunities available in today's market.
Most rehab financing will take into consideration not only the
purchase price, but also the "after repair value" or ARV. This
is an important distinction between rehab financing and traditional
financing.
When financing the purchase of a property, whether it is in need of
rehab or not, many lenders and programs base the loan amount on the
purchase price, even if the property is being purchased at a
discount. This creates a "loan to cost" or LTC rather than a
true "loan to value" transaction.
When investors are looking for acquisition and rehab financing,
being able to use the after repair value of a property enables them
to take advantage of a more leveraged position, allowing for less
cash required into each deal.
True rehab financing addresses this. Although usually
investors are required to bring cash into a transaction, regardless
of the after repair value or LTV ratio, being able to lend based on
the ARV can greatly reduce how much cash is needed.
For
our typical private money rehab financing programs, we require at
least 20% of the sales price to be brought to the table in cash.
The benefit of this, however, is that we will finance the rehab
costs, plus finance an interest reserve.
You can visit our
investor rehab loans
page to learn more about our requirements and what we are able to
offer real estate investors who are interested in rehab financing.
Also, feel free to call us anytime to discuss a scenario and see how
we can potentially help you obtain the rehab financing that will
allow your business to grow.
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