One of the options available for real estate these days is the rehab loan. Rehab loans for investors are specialized types of loans that have specific terms and interest rates – as well as certain qualifications that you must meet – that make them perfect for real estate flippers in other people that invest in property. Rehab loans for investors can provide the funding that you need to restore a property and then turn around and pay off the loan quickly while pocketing the money left over. But this certainly isn’t the only option available to investors; and deciding whether or not you want to use this resource first requires knowing enough about it to make a decision. That’s exactly what we’ll be looking at here.

Do You Need a Rehab Loan?

The first question that you have to answer is whether or not you need a rehab loan. Many investors have already prepared for the possibility of needing money that they do not have in order to perform a restoration. After all, if you get an amazing deal on several properties that you want to flip quickly, you may not be able to spend that much cash money in order to purchase and rennovate. But real estate investors often have various types of financing available to them. Rehab loans for investors are just one of those options.

One of the most common ways that people finance house flipping and real estate investing is with a line of credit; a real estate line of credit allows you to charge up a certain amount for your renovation project, and then pay it off when you actually sell the property. This doesn’t have a huge amount of interest, although it does have some, and it gives you the freedom of always having that cushion there in order to do your renovation without having to go into the bank to apply for a new loan or relying on things like credit cards.

But with rehab loans for investors, there is a specific type of loan that is known as a hard rehab loan. This is a loan that is specifically intended to renovate a single property or multiple properties that are all being renovated pretty much at the same time. You have to talk to your banker and find out the details on both of these in order to see which one works best for you.

Terms & Conditions of a Hard Rehab Loan

There are certain factors that are pretty consistent with hard rehab loans that you want to be aware of before you start to do your own research. If you already know what a line of credit is going to cost you, then comparing these average hard rehab loan rates and terms will give you a much better idea of which type of financial product for Serbia best.

The first thing to be aware of is the interest rate on hard rehab loans this type of loan generally rent you anywhere between 7.5% and 12% interest. These are definitely higher rates than a conventional mortgage, but the reason that they are higher is that the bank or finance company is taking an additional risk when the money is intended for real estate investing. After all, you may never be able to sell the property. You may encounter some major issue when renovating that makes the property worthless. For these reasons, finance companies tend to set the interest rate a little bit higher than for an established home in a homeowner that wants to live in the home.

The loan term typically runs anywhere from 12 to 36 months. You may be able to complete your renovation faster than that, but there is additional time on the loan if you need. When it comes to points for your closing costs, generally they are equal to anywhere from 1 to 10 points or from 1% to 10% of the loan amount.

Hard rehab loans combine the funds that are needed for purchasing the property and then renovating it afterwards, so, you don’t have separate loan products. If you are already getting financing for purchasing property that you plan on flipping or rehabbing, and you find yourself running short on cash renovation, then you definitely want to consider the hard rehab loan as an option. Since you are getting the financing, and it is a short-term loan, then you might as

well take advantage of it for your investment. You may actually end up paying less in interest with a hard rehab loan than you would with a conventional mortgage on a property that you bought to renovate.

Qualifying for a Hard Rehab Loan

Not everyone is able to qualify for a hard rehab loan. There are some qualifications that are pretty much standard no matter where you go for one. Of course, you can always shop around and try to find someone that will approve you even if you get denied at one bank, but knowing what these qualifications might be in advance will give you an advantage when it comes to applying.

Of course, there are the obvious things like a good credit score, but you are also probably going to need at least 25% of the ARV to put down. The ARV is the After Repair Value of the home. You also have to show your income through bank statements as well as a least a couple of completed projects or a background in construction. Lenders also want to see risk statements that show exactly how risky a property is when you purchase it, and they will want to determine that you have the income to make the loan payment even if the property is not able to be flipped and sold.

The bottom line is that hard rehab loan is not for everyone, but rehab loans for investors can be one of the ways to make it easier to purchase and renovate properties for resale or rental. You just have to do some research and determine whether this unique financial product is right for you.

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