Many people are interested in the real estate investing concept. However, most do not know how to get started and how to actually make money in this industry. Real estate investing can be a productive and profitable business, if you have the right tools and information. Years ago, when the real estate industry declined, many homes went into foreclosure. In some states and cities, the housing markets have still not fully recovered. Housing prices are still low in these cities. Additionally, people are still going into foreclosure and these properties are being sold off for much less than market value, resulting in good residential and commercial property investing opportunities.
Although these houses may be sold for much less than market value, they may still cost thousands of dollars to purchase. Many people who are interested in investing in residential and commercial properties are unsure of how to obtain the necessary funding. Hard money rehab loans are for the specific purpose of investment properties, whether they be commercial or residential. Regular banks, where you would obtain a residency mortgage from likely have investment property loans available to you, as well.
Most of the investment properties that you come across require a lot of renovations. Many foreclosures or bank owned properties require a lot of work. However, once the work is completed, the home is worth much more, leaving you with high reward. Many traditional mortgages require the home to be livable. However, most foreclosures are not yet livable. Renovation financing will need to be obtained. Hard money rehab loans are important in commercial real estate investing.
Hard money rehab loans are for the specific purpose of homes that require work. Most of the loans are given out to commercial and other real estate investors. The loan terms tend to be higher than traditional mortgage loans, because they often come from private providers. It is important to pay off these loans, as quickly as possible to prevent high interest charges. Duration or payment period for a private loan is also shorter compared to the traditional loan, which can usually go from 1 year up to 20 years, while private loans can only be granted with duration of up to 5 years.
Hard money offers higher interest rates and lower loan to value ratios. Hard money interest rates can start at 15%, 18% or higher. A commercial real estate investor who sits on a home for too long with hard money rehab loans will quickly cut into their profits. This applies to both residential and commercial real estate.
A person who attempts to obtain hard money rehab loans may be subject to a variety of terms. They should either have really good credit with a lot of income, or they should have capital or other funds that can be used to secure the loan. Private loans, such as hard money rehab loans are more risky, and thus are harder to obtain. Most hard money loans are secured by a property with 30 to 50% equity, so the investor is well protected. This means that if you foreclose on the home and are unable to pay the loan back, they are now subject to the property or the money that you put up for security.
A typical bank loan borrower looking to take out a business loan has to be 2 years in business, have at least $250,000 of annual revenue, have good personal and business credit and be cash flow positive. However, hard money rehab loans may be possible for those investors who do not necessarily fit all of these terms.
Most people have heard about the financial opportunities of residential and commercial real estate investing. The market is recovering, but there are still many real estate opportunities out there. Obtaining a loan for one of these rehab properties can be one of the most difficult parts of real estate investing. Hard money rehab loans allow people with less than perfect criteria to obtain the necessary funds to invest in these type of properties. Real estate investment lenders can find business success if the right steps are taken in this industry.
