Rehabbers Get Aid From Residential Real Estate Loan

A residential real estate loan, also known as a hard money loan

, may seem like a technical four-word term used only by experts in the field of financing. Those who do not know what it is may simply think that it is a loan thats difficult to secure because it is hard to get. But for those who have already witnessed how this mode of financing works, they know that it works wonders. Rehabbers in particular can attest to its usefulness and profitability.

First of all, rehabbers are real estate investors who buy dilapidated properties. They make necessary improvements on the property and then sell it at a higher price. In this business, huge capital is required. Thats because youll need to buy a house and spend on its repairs. Although rehabbers purchase only cheap homes, they usually encounter problems when seeking funds for the repair a problem they do not have to deal when borrowing from hard money lenders.

Take note that banks and other traditional lenders are only willing to lend money to purchase a house. In the case of rehab investors, they will be able to borrow money from banks to purchase a cheap property. As for the repairs? They have to fund them using personal money or another loan. If they do opt for a new loan, thats additional interest and expenses. But with a residential real estate loan, even the repairs can be covered by a single non-traditional loan.

Hard money lenders, when computing the amount they will release, always look at the collateral. In the case of rehabbers, its the property that the investor wants to rehab. They wont base the amount on its current value, which is low because it is still in a dilapidated state. They will assess what the ARV, or after repair value, of the property is. The ARV is of course higher that the current price. A residential real estate loan is often equivalent to 65% of the ARV. Some creditors lend up to 70% of the after repair value. With this amount, the rehabber will be able to buy the house and give it needed repairs to raise its value.

The best thing with hard money is that it can be released in as little as two days. The downside is that lenders are not that easy to find. They are usually local companies that are not well known. Want to know where to go in case you need this financing? Check out RehabHardMoney.com right now.

by: George Thompson

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