Get a Real Estate Investor Rehab Loan.
There are great opportunities for real estate investors today. This may be the best market for real estate investing in our lifetime. But unfortunately traditional financing is not so readily available. There are creative options for financing purchase and rehab income producing real estate projects for investors. Whether you are investing in commercial multifamily housing or mixed use investment properties there are lenders to finance purchase or refinance these rehab projects, even with little or no down payment. Since there is no secondary market for these types of projects your deals will fall into one of two categories. Your deal will either be a non conforming investor rehab loan or a hard money rehab loan.
Non Conforming Real Estate Investor Rehab Loan.
There is no such thing as conforming investor rehab loans. Conforming means there is a secondary market that your loan conforms to the guidelines and can therefore packaged with other similar loans and sold in bulk to institutional investors on wall street. The secondary market would the have established guidelines that all projects would have to conform to. Since this market does not exist the first category of loans are considered non conforming or portfolio loans. Any rehab loan funded in this category will meet guidelines that are similar to conforming mortgages. These loans would meet the general guidelines as all other loans except they require substantial rehab and are investment properties. This means the borrower, real estate investor, would need good credit, verifiable income and assets, an ability to repay the loan, acceptable down payment and reserves, and employ licensed bonded contractors to do the rehab. The advantage to the portfolio real estate investor rehab loans versus the hard money loans is that the rate and fees are usually substantially lower. The disadvantage is there are many more qualification criteria and it takes longer to fund a deal. But, if you qualify and have the time and money for the down payment it is to your advantage to utilize this loan versus a private investor rehab loan.
Hard Money Loans.
Though the rates are much higher ( 10% to 15%) and the fees will be from 4% to 10% hard money loans could actually be more profitable to real estate investors than non conforming financing. First of all these loans generally fund in 2 to 4 weeks. Secondly, the qualifications are less stringent and therefore you can do more deals. Truly you may qualify for a hard money loan when you will not for a non conforming loan. As such you may have no other option.
Qualifications of Non Conforming and Hard Money Investor Loans.
Both programs require you to purchase property where the after rehab value is 65% or less. Both programs require you to have an acceptable exit strategy. Non Conforming programs will always require a down payment of 20% to 35% of the purchase and rehab costs. Hard money loan programs may or may not require the down payment at all. Both programs will make sure the contractor has the experience and licensing to complete the renovation. So if you have the experience, property with substantial equity, exit strategy and assets you can make lots of money by purchasing and renovating investment property.