Wednesday, May 21, 2008

Real Estate Rehab Private Hard Money Lenders Are Just A Click Away Online

For real estate rehab private hard money lenders are often the best choice, particularly if you want to spend as little of your own capital as possible. Here's why.

Once you and a seller agree on a purchase price (regardless of the amount) a commercial bank will finance 80% of it. That is, if they will approve the loan in the first bank. Most public financial institutions do not look kindly on rehab projects, for a number of reasons. On the other hand, hard money real estate investor rehab loans are the specialty of some private financiers.

But, for the sake of argument, let's say that you are able to get a bank to approve your loan. You pay 20% of the purchase price out of your own pocket. Even if the purchase price is as low as $50,000, you will pay $10,000 cash at the closing table. Then, there are the closing costs to consider. Typically, they run around $2000. So, you leave the bank with $12,000 less than you walked in with.

If they specialize in real estate rehab private hard money lenders know that you need to keep as much of your own capital as possible. That way, you have the freedom to look for more deals. In order to make the most out of rehabbing, you need to be able to act quickly when you see a fixer upper with a motivated seller. If all of your capital is tied up because of down payments and closing costs, you might miss out on a number of opportunities.

So, private groups that offer hard money real estate investor rehab loans will finance up to 65% of the "after repair value". In other words, if that house you bought for $50,000 will sell for $100,000 once you finish painting and replacing the carpet, a rehab lender would finance 100% of the purchase price. They do not require a down payment. You could even up the purchase price to $52,000, get the seller to pay the closing costs and end up spending with zero out of pocket expenses.

Of course, you will have to spend money making the repairs. You should have the capital required to complete the project, but some private groups offer funding plans for repairs, as well. The best ones offer deferred payment plans, proof of funds letters, pre-approvals and they can close a deal in as little as two weeks. Contrary to what some people think, they are not loan sharks. The fees that they charge are reasonable and, by law, they cannot use unreasonable methods to collect.

Whether you are just starting out or have years of experience in real estate rehab hard money lenders can help you increase your profits and improve your cash flow. They could be the best choice for you next project.


James has been in real estate for over 30 years and is an expert on residential and commercial hard money loans. He is a regular contributer to Hard Money Guide, a comprehensive resource for those looking to secure funding for real estate projects.

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