Rehab-Real-Estate: Fast And Easy? Go Private Money

Rehab-Real-Estate: Fast And Easy? Go Private Money

Seasoned real estate investors recommend using private money when financing projects. And they have a lot of reasons for doing so. Here are some facts you need to know about private money, which is known in the real estate investing world as hard money.

Private money financing is popular among real estate investors because it is fast. Lenders know the urgency involved in real estate invetsing. They know the competition is tough and that if you need funding, you need it fast. They understand this and this is how they operate. Despite higher risks, hard money lenders approve or reject loans in just days. They even extend credit to those who have poor credit scores. Their way of assessing applications enables them to release loans in just days.

Lenders in this kind of financing will hardly care how muchyou earn from your office job, in case you have one. Unlike banks, they do not evaluate borrowers based on credit scores or credit reports. What lenders care about is the deal you plan to close using their money. In short, you must convince a lender that your project is worth funding and that you will be able to repay them through this.

Let us take rehabbing houses as an example. In case you need private money financing for a rehabbing project, lenders will evaluate the property you want to rehab. They will determine whether it will result in positive returns. If you are able to prove that your plan to rehab that property will bring you profits, the expect the loan to be approved. Now that's easy money.

Hard money, unlike traditional loans, can also finance 100% of a rehabbing project. That means you get yo buy a cheap property to rehab and repair it using one loan. This is possible because of an unconventional way of computing how much money you will get from a lender.

Hard money lenders usually give between 60% and 70% of the after repair value of the property, better known as ARV. This is usually enough to shoulder both purchase and repair costs. It some cases, it can even answer closing costs. If you went to traditional lenders, for example a bank, you are likely to get an amount just enough to buy the property you want to rehab. As for the repairs, you will have to apply for a personal loan for that or use your personal money.