Renovation is a different landscape than it was in prior decades. In today’s world, many homes are being foreclosed open, or sold cheaply for other reasons. With that in mind, buyers are snapping up these houses with the idea of renovating in mind. For some, renovating is done with a dream home in mind. Rather than spending a lot of money outright on the home they want, buyers spend a little bit on a home that’s in “bad shape” and slowly turn it into the house they want, saving a lot of money in the process. For others, renovation is done with the idea of selling the house for a profit down the road. In fact. some take this second idea so far that they turn it into a business. However, if you want to get started in the commercial real estate business, “flipping” houses for a living, you need to have the money necessary to start out with. Renovation lending is a type of lending that is meant specifically to fund these types of projects. The types of loans dealt out in these cases are often referred to as hard money rehab loans, and they’re different from typical loans in several ways. Let’s look into the advantages of investing in commercial real estate, renovation lending, and how this all will work for you.
Hard Money Loans For Real Estate Investors: What Makes Them Different?
Renovation lending, as we mentioned before, sets itself apart from typical lending in a variety of different ways. Hard money loans are sometimes referred to as real estate secured investing or secured short term loans. They’re different, firstly, in terms of interest. Usually, these loans offer higher interest rates and lower loan to value ratios. Often, the interest rates for these loans start around 15% or 18%. Of course, these loans don’t necessarily come with the same types of requirements that traditional loans are associated with. When a traditional business loan is sought out, the borrower usually has to have been at least two years in business, have at least $250,000 of annual revenue, have good personal and business credit, and be cash flow positive. As a hard money loan is easier to get, the investor is protected in different ways. Therefore, they’re usually secured with 30% to 50% equity. These types of loans also have different duration periods. A traditional loan can usually stretch from one year to 20 years, while a private loan can only be granted with a duration of up to five years.
Reasons To Invest In Commercial Real Estate: The Practical Elements
Before even considering renovation lending, you should first seriously evaluate whether or not “flipping houses” is really for you. To be sure, it’s not as assured a business as others — you have to be fully committed and ready to work hard. Essentially, it involves a lot of spending, but also a high profit level if you play your cards right. Of course, as mentioned above, some seek out hard money loans for one-time renovation projects, rather than treating them as a business. To start out with, you need to evaluate rather or not a home is a good option for a renovation project. There are plenty to choose from in some areas — 2014 alone saw 327, 069 home repossessions. The reason why people choose home repossessions to renovate is that they are usually priced very low. That’s the nature of the game — spending the least amount of money outright on a home so that you have enough left over to make the right renovation investments. Then, the home can be sold for much more than you paid for it at first or invested in it.
Renovating Homes: Appealing To Buyers
A big part of renovating a home, when you plan on selling it afterwards, is making it appeal not your sensibilities, but those of potential buyers. Peruse houses for sale in the area, know what people are looking for — and you’re on the path to making a profit.