For your rehab project to be successful, you need the right financing. The funding also needs to be easily accessible and at a reasonable rate. By estimating how much the project will cost you, you can determine the amount you will need and the financing option to opt for. Discussed below are some of the financing options you can choose.
Hard Money Loans
These are usually short-term loans from investors secured with collateral. Typically, they come with higher interest rates as they are short-term. However, they are suitable for a rehab project as they are easy to qualify for despite credit issues. Most people also prefer hard money loans as securing funding is quick, and they can start their project as soon as possible. These types of loans are ideal for any investor with experience in property fixing and flipping. But, if you fail to meet the loan terms, you can easily lose your property.
Equity in Your Primary Residence
Using the equity in your residence can be done either through a home equity loan or cash-out finance. A home equity loan is like a second mortgage. Aside from your existing mortgage, you still use the same residence to acquire a loan to fund your rehab project. You can also opt for a home-equity line of credit instead of taking a lump sum. On the other hand, a cash-out happens by replacing an existing mortgage loan with a new one but under different terms.
Bridge Loans
In case you already have a rehab project about to sell shortly, then you run into another deal that is too good; a bridge loan can help you finance that new project. This means you do not have to wait till you are done with a property to acquire funding for a new one. You will also find that bridge loans are more short-term than hard money loans, usually lasting about a few weeks or months. The major disadvantage is that bridge loans have high rates and fees compared to other financing options. However, if you are sure the property will bring a solid return, then high rates and fees become less of an issue.
Among the three options discussed above, you can choose the financing option most suitable for you. If you have a rehab project that needs funding, reach out to Revenue Park LLC and see how you can get assistance.