HOW TO GET A LOAN APPROVAL ON YOUR NEXT REHAB PROJECT OR FIX AND FLIP PROJECT.
Below is an interview with the Andre Jimenez, VP of Winvest Corporation – a California Hard Money Fix and Flip Lender.
A hard money loan is an alternative form of financing used by individuals and investors who may not qualify for a conventional due to strict lending limitations or condition of the collateral. Used properly a hard money loan is a great tool for real estate investors looking to leverage their deals for greater returns. Moreover, most hard money lenders do not have a limit on how many properties you can own. If you are flipping properties then you want to find a lender who specializes in your market and understands your business model.
A lender focusing on funding rehab projects is going to look at two things, the borrower and the collateral. Although each lender will have its own list of criteria, the first thing they look at is liquidity. How much capital do you have available for the project. Most like to see somewhere between $15,000-25,000 in liquid funds or credit lines for every $100,000 borrowed. It should be enough to cover monthly mortgage payments, taxes, insurance, and some of you rehab budget. Lenders will also look at experience, have you done this successfully before? That doesn’t mean you can’t get a loan if this is your first deal but be prepared with a budget, plan, and exit strategy when applying.
Collateral requirements differ by lender but usually the loan balance will be somewhere between 50-65% of the property’s value. Some use current “as is” value while more sophisticated lenders specializing in rehabs will base the loan amount off After Repair Value (ARV). Location, scope of the project, and sales comps will determine whether or not the lender will be willing to finance your deal. There are many different lenders using different underwriting models. Shop around until you feel comfortable with the lender you’ve chosen. Some lenders are cheaper than others but price does not always dictate quality. Find a lender who you know has a good reputation within the industry and can actually close on your deal. Remember being prepared when making inquiries goes a long way to facilitate a loan approval. You can contact us or other competent lenders on this site.
Andre Jimenez
Vice President
Windvest Corporation