Best Way To Finance Rehab Or Quick Flip??????
Do most lenders have specific loans aimed at rehabbers or investors who don't plan on keeping the properties long?If not, what would they have to gain by doing your loan. You wouldn't be keeping it long and they wouldn't be making anything on the interest?Do they usually have a prepayment penalty? Or do they agree to a certain percentage of the profit or what?I'm sure this sounds like a dumb question to most of you but I have no clue. I'm gonna be calling around on monday for financing leads and I want to sound like I have more of a clue than I do. 
Monday is MLK day. No banks will be open. I should know - I work for SunTrust Bank.
But anyway, most rehabbers do not get banks loans. On most investment properties the banks will want 10% down for an investment loan with no points and low closing costs. Most rehabbers either (A) need their 10% down money to finance the rehab (B) the property is in such bad shape that it would be difficult to get a conventional loan (C) they are buying their properties from other investors or sources that require a quick closing. I believe most rehabbers either have money partners or use hard money. The hard money lenders are typically short term interest only loans which interest of 12% to 16%. They might want an application fee and points at close. Usual LTV (loan to value) that they require is 70%. This means that if the ARV (after repair value) of the house is 100k, they will loan 70k max. The 70k could finance the house and repairs. The repair money will be paid in draws after an inspection.
Each lender is different and so is each situation. The above is just a general observation.
Brenda
You pretty much hit the nail on the head. I am paying 12% interest with a 4 month mininum and 6 points with a 3 grand mininum there too. Also inspection fees are expensive and their attorney fees. Still better than a partner.
Good LUCK and Thank You
Hope this helps some
Ted Jr
O.K great that does help. Thank You. It sounds like I'll have to just talk to alot of lenders and work out the best deals possible. Thats right it is a holiday on monday! I forgot because I unfortunatly don't get it off.
What if I find a house that just needs cosmetics and wouldn't really be classified as a rehab. I know I won't be keeping it long. Are there many short term interest only loans given for something like that?Maybe a hard money lender would give a high interest only loan for a few months? <IMG SRC="images/forum/smilies/icon_rolleyes.gif">
[ Edited by McMadhouse5 on Date 01/18/2004 ]
[ Edited by McMadhouse5 on Date 01/18/2004 ][ Edited by McMadhouse5 on Date 01/18/2004 ]
Cosmetic only is a different story. If your seller has 45 days to wait, getting a conventional loan will be the cheapest route if you have decent credit and can afford the 10% down + closing costs.
Realize that if you have a hard money lender that does not charge a high application fee and many points, that it can be cheaper to finance with hard money if you keep the property for a very short time. My hard money lender's closing costs are cheaper than the banks. But the monthly mortgage payment makes up for the cheaper cost in about 2.5 months.
Brenda
There are loans for rehabbers. Most of the time it is an interest only loan for 9-12 months. There are based on the subject to appraisal, they are anywhere form 60% to 80% of the value. You only have to qualify once and they must be investment property. I don't know what area of the country you are from so I can't give you the name of someone to call. LORI
I'm in Connecticut. If you know of any in my area it would be greatly appreciated. I have a few contacts but the more the www.better.Thanks for the responses. It sounds like the best way to go depends on how fast I can turn the www.property.My first move is gonna be to call around and get pre-approved at a few places so I can move fast when I need to. Anyone know of a fast moving lender in Conn. I have good credit and some money in the bank. <IMG SRC="images/forum/smilies/icon_wink.gif"> [ Edited by McMadhouse5 on Date 01/19/2004 ]
Tedjr;
My HM lender hit me for 12%for 12 months at 65%LTV, $1,000 origination and legal fees, 6 pts. or $5,000 minimum. Nor a bad deal, really.
He only does Texas but closes quick and I used my own inspector and appraiser. Saved some bucks there too!
C-
PS: Incidently, I have a source for 100% financing on rehab loans - 680 FICO only requirement.
Hope this helps.
C-
I guess to go back to my original question. The way the lender makes money off you on a short term loan is to charge high points. What if you don't mention it's a short term loan and just pay the pre-payment penalties when the time comes.Would that be cheaper or a more expensive way to go???
Find yourself a good mortgage broker that can get investor loans or works with a lot of investors and knows what to look for. You can get cheaper rates and pay less points. There are lenders out there who will do investor loans. That way you don't have to have your credit pulled many times by applying at different banks. The broker will pull your credit once and find you a loan.
Tanya
Thanks Tanya. I think thats what I'll www.do.I know using a broker can cost a little more, but in the long run I guess it's worth paying professionals to do what they do best and get you the best deal for your particular www.situation.There are plenty listed in the RE papers here. I'll just start calling around tommorow and see who I can find.