Whether you are planning to do the remodel yourself or hiring a contractor to remodel the attic, putting a mother-in-law apartment in the basement, a rental studio suite over the garage or buying a property with the intent of remodeling and reselling it, your best option for rehab lending is most likely a private lender.
Get Up to the Remodeled Appraisal in Rehab Lending
Traditional lenders, such as banks, credit unions, and brokerage houses, normally only lend 80-percent of the current home value. Others will only give you 50-65-percent if you have less than stellar credit. In addition, most won’t even consider the remodeled value. What you’re looking for with rehab lending is most likely short-term money. Therefore, even though the interest rate is higher than at the bank or a credit union, you will not be paying it for 30 years.
Most will look to remodel and sell right away. However, if you are looking to keep the house after the renovation, you should convert to a long-term loan or mortgage so you’ll pay a lot less in interest charges. However, short-term rehab lending is a great approach if you want to increase the property value right away. Or, if you have an investment property you want to remodel to rent or sell, but it’s in bad condition, and banks and other financial institutions won’t consider lending you what you need for the project.
The Benefits of Using Rehab Lending
When a real estate investor sees a property foreclosure or a property in poor condition but with potential, the investor, contractor or any interested party can approach a private lender about a consolidated loan. This way, they can borrow the money to buy the property and do the remodeling with the same money.
Normally, the person who will borrow the money must have a clean title and be the first lien-holder, but it depends on how much financing is needed and the conditions of the private lender. Oftentimes, the private lender of rehab money can arrange the terms of the loan so the investor will only get the loan if they win the auction on the property. This method makes it a lot easier for anyone to jump into the fray and start a “fix and flip” business.
Why Red Door Funding?
Red Door Funding, at (832) 539-1099, can do the appraisal by looking at the property and considering the planned renovations, to come up with the appraised value after renovations. A person in need of rehab lending can receive up to the appraised value of the property on a short-term loan.
Call the rehab loan professionals at Red Door Funding, or go to the website and complete a credit application here. Send us an email with your concerns or questions, dwilliams@reddoorfunding.com.