A little known method for financing would be to obtain funds through a private lender or equity fund. These lenders offer rehab lending programs that are based on the After-Repaired-Value (“ARV”) of the property and allow for up to 60%-100% of the purchase price some programs are a combination of both debt and equity that includes the purchase price, entire rehab budget, all closing costs, six months of prepaid interest reserve and refunds your earnest money deposit back to you at the close of escrow. Rates start are usually between 9%-14% but rate can be reduced based on as-is value transactions. Terms are usually 1 yr with extensions offered. Generally no pre-payment penalty unless the loan term is less than 6 months.
The only lenders I am direct to lend nationwide .As the inventory start to dry up, the need for ground-up construction financing has created a niche that lenders are offering with high LTV/ARV Financing
They will work with 1st time or Seasoned investors, they can offer them a hard money loan generally priced at 65% ARV on single family residences. If Seasoned, 100% Financing available: 70-80% ARV with a Profit Split starting at 70/30. You must prove that you have completed 2-3 property rehab flips in the past 24 months. I have seen them consider loans from $100,000 to $5,000,000, sometimes above on certain cases.
Private money lenders normally focus on lending on non-owner occupied properties, but now some will offer owner user and owner occupied business purpose loans on a case-by-case basis. Most prefer 1st lien position only, but I also know lenders who specializes in 2nd mortgages on single family, condos, commercial and improved income producing properties.
Some things to keep in mind when considering a hard/money or private loan:
Purchase: Value is based on the actual purchase price.
Refinance: Value is based on lenders opinion of the appraised value of real estate for refinances. They use their own appraisal review process and may require a site inspection.
Rehab: Value will be based on after repaired (ARV) or future value.
Some lenders offer flexible blanket loans that can include points, fees and may include an interest reserve into the loan and multiple income sources may be considered. Some will consider owned properties to cross-collateralize the loan to increase leverage. If you own a portfolio with equity and you want to establish a credit line against that for investments or flipping, they love to establish these relationships.
Email me today if you are interested in being introduced to a lender.