If you are buying an Investment property you need to know. This type of Real Estate Loan is made to your LLC and offers % of the purchase price loan and up to % of the Rehab budget to rehab , remodel and fix up the property.How Fix & Flip Rehab Loans Work No matter if it is a or another area, if it has a Rehab budget approved it is important to understand the process of getting reimbursed for the rehab.
Once you do one property, you will see how easy it is to buy Investment properties needing some work.
The process is simple. Let’s use a Houston Investment Property as an example. You find a property and get approved for a new loan. The loan funds % of the purchase price to close Escrow. But it also has an Approved budget set aside for future reimbursement of rehab work. Before you closed on the loan, you get a Contractor’s estimate of the cost for the rehab. You break that estimate down for each item and decide what increments you will be getting rehab reimbursements.
The rehab budget is provided to the Appraiser and he gives not only an “AS IS” Value but also what the property will be worth once the items you put in the rehab budget are completed. In this example, your Houston Hard Money Lender will hold funds in reserve for the rehab work. Once a portion of the rehab work is completed you submit for an inspection. That is usually done within 24 hours of the request.
Let’s say you had $ 5,000 on the Approved Rehab Budget for new wood floors. The floors are now installed. The inspector makes a quick visit, notifies the Lender of completion and the $5,000 is wired to your bank account the next day.
Experienced Houston Investors will have a relationship with their Contractor. Usually, the Contractor does the work, presents you an invoice and once you have the Rehab draw funds in your bank account, you write the Contractor a check. Knowing How Fix & Flip Rehab Loans Work will help you buy more Houston Investment Properties while also increasing your cash flow.
Every Lender will have their own program to buy Investment Properties needing work. You want to get a loan that is Interest Only for 12 months. Do not settle for a 6 months term as to many surprises can arise costing you. Even though the Loan may fund up to % of the purchase price, be prepared to also pay Closing Cost. That can add up to another 8-15%. and that is How Fix & Flip Rehab Loans Work.