You have heard about fix and flips—buy a house, renovate it and sell it for a profit. The first step is find a property—the next step is financing.
You find a property at a great price in a good location and you just know you can get it in tip-top shape and make a killing on a sale. There is only one problem—you need financing. You’ve heard that hard money lenders are typically where investors get their financing. But, you haven’t ever done this before and need a quick rundown of the process. This article will walk you through the steps of getting financed for a fix and flip project.
All hard money lenders are different and have unique requirements for financing renovation loans. Certain lenders loan on a percentage based on appraised value and there are others tend to loan on a percentage based on the purchase price of the property. When you meet with your chosen lender they will give you a complete breakdown of their fees and terms—this will include interest amount, loan points and all closing costs. Closing costs will include all document fees, notary fees and escrow fees. The lender will explain clearly what that means to you and your financial obligation.
There are 7 basic steps of the hard money lending:
1. Get pre-qualified—This consists of finding out the requirements of the lender and applying for the loan. The application process is simple and straightforward. It typically takes about 15 minutes to become pre-qualified.
2. Search for a property that has a price you can afford and is in a good location and get it under contract.
3. Contact you lender and give them: the contract price, estimated cost of repairs and give them an idea what you believe the after repair value will be.
4. Your lender will typically send their appraiser out to the property, but occasionally they will give you a list of approved appraiser and you then are5 responsible to get the assessment done and to the lender.
5. The lender will ask for any documents that need to be verified. It is your responsibility to get the documents to your lender quickly.
6. At this step your terms and rates will be agreed upon with your lender.
7. You close your loan and buy your property
Renovation loans typically include any rehab costs, as well.
When you receive your loan based on ARV you will have more money than the purchase price. This is how it works. If you’re lending 70% ARV and the purchase price is $95,000—and your ARV is $155,000 you will receive $108,500 funding. Hard money lenders will lend more for renovations on a job by job situation.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.