Private Money Lender


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Many People ask this question that how does a rehab loan work? With Private Money Lenders, you can come to know about its exact meaning. If you have any question or query about these loans, Call us Today 435-565-1769 for getting more information regarding Rehab Loans.

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Private Money Lender

  1. 1. How Does aRehab Loan Work?
  2. 2. With so many foreclosuresand short sales out there in need of repairs, buyers ofthese properties often ask us,
  3. 3. “How does a rehab loanwork?” Most of our clients arereal estate investors who are buying distressed properties and using rehab loans to get them looking good again.
  4. 4. Many real estate investorshave the same question, “How does a rehab loan work?”
  5. 5. Because each private money lender who offers a rehab loan program has a differentprogram, we will highlight the most common hard money rehab loan in our discussion here.
  6. 6. Because a property is always more valuable after it’s beenfixed up, a hard money rehabloan is usually given based on the value of a property after the fix up.
  7. 7. For example, if you buy a property for $150,000 but it will eventually be worth$215,000 once it’s all fixed up. The value of $215,000 is the ARV or the after repaired value.
  8. 8. But how does a rehab loan work in this case? Most bank loans are givenbased on a percentage of thepurchase price and not on a percentage of the After Repaired Value.
  9. 9. How does this differ from a rehab loan? Most rehab lenders will lend on a percentage of the AfterRepaired Value and will giveyou a loan for 60% to 65% of the After Repaired Value.
  10. 10. Hard money rehab loans areby far the easiest loans to getfor real estate investors who are buying and sellinginvestment properties. Theycan usually fund in less than 14 days,
  11. 11. but the interest rates are typically a lot higher thanbank interest rates. Expect topay 11% to 12% interest onlyon a hard money rehab loan. The loan term is usually 6 months to 1 year,
  12. 12. and you have to expect to pay a loan fee as well. The loanfee is typically 3% to 5% of theloan amount for a rehab loan. Let’s do a quick example of how a rehab loan works:
  13. 13. A foreclosed property needswork and is under contract to buy for $138,000. The property needs new appliances, flooring, paint,etc. It will cost approximately $15,000 to repair
  14. 14. the property and get it ready to resell. Once the needed repairs and upgrades to theproperty are completed, the property should sell for $190,000.
  15. 15. The buyer could get a hard money rehab loan to purchase the property. If thelender gives the buyer 65% of the After Repaired Value of $190,000 he could get a loan for $123,500 towards
  16. 16. the purchase price of$138,000. The buyer closes on the property using the rehab loan to purchase it. The monthly interest payment is $1,380 based on a 12%, interest only rate.
  17. 17. The buyer puts in $15,000 torepair the property and sells it in 120 days. The rehab loan gets paid off when the property sells. It’s that simple!
  18. 18. If you have any questions about how our rehab loanswork, no question is a dumbquestion. For more info, clickhere, or submit an inquiry at this link:
  19. 19. Click here for more information.
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