We have renovated homes in the past and have a rental property currently.
We have recently relocated and haven’t sold our previous home. We would like to acquire some property, but are overextended credit wise. We can do all re-hab ourselves, but need cash. Is it dreaming to thing that we could find anybody to finance us? What kind of offer is good for an investor? A certain percentage of profits? What about hard money lenders?
Hard money lenders are more flexible with credit than conventional lenders but loan less % of the value of the property and charge more interest. The rates and terms vary from lender to lender but will cost a mininum of 3 to 5 points and 12 to 15 % interest. Your cash requirement will vary also from 0 to 10% downpayment. Most want you to have some funds into the deal. They also want to make sure your estimates to remodel the property are enough to cover the costs. Be sure to add 10% for misc to be safe.
You can find private investors too or partners. I too am looking for partners and private investors to do more deals. At one time I had money and no deals and then later no money and plenty of deals. It is starting to even out again and I am using hard money too.
Hope this helps some. If I can get hard money lons with my horrible credit and cash flow shortage you should be able to also.
So when hard money lenders loan is it on the value of the house after it is rehabbed?
Also, if I get a private investor, what is an attractive rate for them? Should they get a percentage of the profits? A high interest rate on their money? Both? Or does some other arrangement work better?
They will usually loan 65 to70% of the rehabbed value and escrow the repair money until the work is complete. On large repair jobs they will allow draws based on the work completed. Some are tougher and will only do 50% of as is value and no rehab funds. They are pretty much useless unless you have funds available and if you do then why use them.
Private money is wide open . Some will loan just interest only at 12% and some will want to be partners with 0% interest. Some too will want you to put up 50% of the funds and or credit and be partners. There are numerous ways to do deals with private investors. Best just to try to work something out where both parties win if the project is successful and neither party loses on a failure and hopefully break even.
Good luck on getting funded and please ask all the questions of the club you need.
Thanks for the clarification. I know that some traditional loans that include rehab funds want contractors to do the work. That doesn’t work for us. We do everything ourselves and of course, do it all up to code and pull permits and the like.
If my potential investors (friends) aren’t interested, is there a source that lists private investors? We see our investment as labor and materials, just need the money part.