A hard money rehab loan is a short-term financing option used by real estate investors to purchase and renovate investment properties. Hard money rehab loans allow investors to purchase homes in need of renovation and rehabilitation under terms that are more flexible than traditional, long-term mortgage loans. Rehab loans are issued as a percentage of a property’s expected after-repair-value (ARV). A property’s ARV is equal to the expected amount the property will sell for after all renovations are made.
Hard money rehab loans usually have a quick approval process, 06-12 months financing terms, and good interest rates between 7.5% – 12%. Hard money lenders offer rehab loans of up to 75% ARV and can get investors funded in as little as 10 days. Further, they fund the purchase and renovation of both single-family homes and multi-unit properties, as well as offer interest-only payments, making it a good option for rehab investors.
If you found the perfect Rehab or Flip Deal and can’t find a traditional bank to lend or approve the financing you need, hard money rehab loan would be the best option for you. You can utilize easy lending criteria and quick closing services of a hard money lender that will finance a rehab loan quickly than a traditional bank. Every hard money lender has a set of requirements to fund and close a rehab loan. Here are some of the basic information required by most hard money lenders:
1. Interior And Exterior Photos Of The Property
You will be asked to provide photos of the exterior and interior of the subject property. For external photos, it would be ideal to provide a front, rear, sides of the property, as well as street scenes. For the interior, a few images of the various room, units, property amenities and good to see images would be helpful. You can also provide extensive photos of the property areas that will be repaired, replaced or removed, digital copies and a walk-through video. The more pictures submitted, the better the chances of approval.
2. Bid For Repairs:
Hard money lenders will require written estimates in order to process rehab loan application. You can contact a local contractor, handyman or repair specialist and get written estimates. Also, if you plan on painting and doing the make-ready yourself – still get a bid for repairs to give to your potential hard money lender.
3. Purchase Agreement:
They will need to see a signed copy of the purchase contract, the title company, and special escrow funding instructions if any. A real estate purchase contract is a binding agreement between two or more parties for the purchase, exchange or other conveyance of real property. Showing them a copy of the contract you plan to use is still a smart move and will make your property report compete and legit.
4. Proof of Insurance (POI):
You will need to provide proof of insurance to your hard money lender. It’s a type of documentation that a person can provide to another individual proving that the person has valid insurance with an insurance company. You can contact your insurance agent and get a quote for liability and hazard insurance for your hard money lender. This will ensure that the lender will be repaid in the event of the severe act of vandalism or catastrophic loss that occurs.
5. Preliminary Title Report:
This document is a tricky one. Some hard money lenders prefer to work with the certain title company. If you have a preliminary title report or confirmation that there is not a clouded title share this information with your potential hard money lender, else you don’t need to purchase title insurance or a full certified report.
Each hard money lenders have their own unique set of requirements based on their lending area, property purchase price, commercial vs residential, and loan repayment terms, but they always like to work with well informed and serious real estate investors.
The Bottom Line:
Hard money rehab loans are great for the fix and flip projects and for buying rental properties that need a small repair work done. Hard money rehab loans offer real estate investors a short-term loan with interest-only payments, quick approval times, and facilitate both the purchase of a house and it’s rehab costs into a single loan.
If you are looking for hard money rehab loans, take a few minutes to read these basic requirements to get your real estate investment deals funded quickly. To apply now or to get more information on our hard money rehab lending programs, contact Magna Capital Group, Inc. today and speak with one of our expert representatives at (310) 734 4044 or email at email@example.com.