Real Estate Loan For Real Estate Investors

If youre buying a house for your residence, a bank loan will probably suffice

. But if youre a real estate investor and you want to purchase a property as an investment, theres a better form of financing you can use. Some call it private money; others hard money. To make things less complicated and technical, call it a real estate loan. It doesnt matter what name you attach to it. The important thing is its the loan especially designed for real estate investors.

This form of financing, unlike traditional home loans given by banks, looks at the loan application from the point of view of an investor. Study this example to better understand the point: you saw a property thats in a poor and shape and being sold at a discount price of $40,000. You plan to rehab, or fix and flip it. It means you will need money to purchase the property and to repair it. Lets say the house will be worth $90,000 after your spend $20,000 to carry out the improvements. This means that for you to succeed in rehabbing the property, youll need at least $60,000, and you can get that from a hard money lender, not from a bank.

Traditional lenders like banks and credit unions, in this example, will only lend you around $40,000. Thats because they think that you need that much money to own the property and its true! It wont do god to tell them that you need another $20,000 because they wont release that money for you. Meanwhile, a real estate loan may shoulder all of your expenses. Thats because the private money lender will consider how much you need to make the deal work.

In a way, these non-traditional lenders are also investors. They know that for you to be able to repay them, you will need to make the deal work. To make the deal work, you need money for the purchase and repair of the property. Thats how a real estate loan is computed. That is why instead of basing the amount theyre willing to release on the current value of the house; they will base it on the estimated value of the property after the repairs have been completed. In the example above, it is $90,000. They can give borrowers around 70% of that value a percentage that usually covers all expenses needed by real estate investors.

Still using traditional loans for your real estate deals? Make the shift today. Visit RehabHardMoney.com right now.

by: Matt Schmitt

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