Since hard money lenders, California based that is, have a bulk of their business comes from rehabilitation projects, we thought it would be useful to over a few basics. For starters, many trust deed investors often wonder what it takes for a project to qualify as a rehab project. Moreover, many people in generally are curious to the rehab guidelines when working with hard money lenders. California commercial and trust deed investors, in particular, may be wondering about the rehab basics as well.
Thus, without further ado, let’s address who can qualify for rehab financing? Well, for starters commercial or trust deed investors can. But, investors are not the only ones. In fact, contractors, subcontractors, brokers and even realtors can all get hard money rehab financing. With that being said, just because you qualify does not mean you can use your hard money financing all willy nilly. In other words, there are specific projects and they include the rehabilitation of single family residence, multi-family dwellings, commercial, apartments, duplexes, triplexes and fourplexes (in short, investment properties only).
So, now that you know who qualifies and what kinds of projects are hard money rehab financing eligible, it is important to note that most lenders that deal in hard money only lend up to 60% of the purchase price. Of course, this is not a set standard and you will be able to find other lenders whose lending percentage varies. But, nevertheless, you should be aware of what is out there and what if any after repair value regulations apply.
Besides, a noticeable difference in the lenders LTVs, you will also often see a large range of down payment percentages i.e. anywhere from 15% to 30% of the purchase price. What you will not see a large variation in are the loan terms. This means your standard hard money rehab loan terms apply (12 to 60 month for rehab with an option to extend short-term rehab loans of 6 to 12 months). Moreover, just like any other type of hard money financing, rehab refinancing does not impose prepayment penalties. Thus, you can see that most hard money lenders understand the nature of the rehabilitation business. In fact, these particular kinds of lenders, understand that for a rehabilitation project to truly be successful it needs to be completed in almost record time.
Since hard money lenders understand the urgency that comes along with these kinds of projects, you will typically see funds being released quickly and in the most appropriate manner for your particular project. This means if you need your rehab financing in two installments as soon as possible it can be done. Similarly, if you prefer weekly disbursement most lenders will also accommodate your needs. Lastly, because most lenders understand that time is money , they often allow documentation (photos of completed repairs) to be emailed versus scheduling an inspection.
Dennis Dahlberg Broker/RI/CEO/MLO
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 the author: 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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.