subject: Rehab Loans Are Forever [print this page] Rehab loans are bound to be around for as long as the American Dream of home ownership is around. This ultimate endeavor of owning an abode to shelter a family fuels the real estate investing business, which in turn finances scores of deals through these loans. And while this form of financing if often misunderstood by private home buyers, investors know that as long as they are in the business, they will keep on using this funding method.
For common people to understand why rehab loans are forever, it is important for them to know more about the business of rehabbing homes an industry that closes deals with the help of such loans. Rehabbing houses, also called fix and flip in many areas, is the revival of a property. What investors do is they search for dilapidated houses in the neighborhood. They will then purchase these properties at discount prices and renovate them. Once back in a good condition, they will be sold to private home buyers people who want to realize the American Dream.
The business of fix and flip, however, is a costly one. You need to buy a property and then spend a few more thousand to repair it. Rehabbers simply cannot go to banks to get financing for their projects; such funding wont suffice. Traditional lenders like banks are often willing to lend money for the purchase of a property; they wont finance its repairs. For this reason, real estate investors tap rehab loan lenders.
Rehab loans are able to cover all the expenses of a rehabber in most cases. What rehab loan lenders in this form of financing is study whether the value of the house will indeed rise after the repairs. If they see the profitability of the property, they will provide the financing to the investor. These creditors will then take the property as collateral and give the investor between 60% and 70% of the propertys value in good condition. This percentage, which changes depending on the agreement, often shoulders all of the expenses of the investor, including repairs.
Apart from the bigger amount, these creditors are also able to release loans much faster. Thats because they are also in a hurry to make money. They do not want to pass up the opportunity. After all, they will only lend the money and the investor will do the rest.
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