Photo Source: Samuel Wantman on Wikimedia Commons.
If you’re a fan of real estate-based reality TV, you’ve probably seen shows like Rehab Addict, Flipping Vegas, and Flip This House. These shows make an important point. Sometimes, the best deals on the market are houses that aren’t ‘turn-key.’ A renovation can turn a house that begins as a good investment into a great investment.
However, as these shows make clear, well-done rehabs take time and money. While the San Francisco Bay Area provides many opportunities to rehab or flip existing properties, chances are that you’ll need financing to make the changes you want. A rehab loan can give you the capital you need to turn a dreadful house into a dream home. Like any kind of financing, rehab loans come with benefits and draw backs. Before you borrow, you need to understand how a rehab loan works.
Damsels in Distress
Most banks won’t give you a mortgage on a distressed property. When a bank does make a loan, it will only lend you enough money to cover the property’s current value. If you’re a small investor, this won’t give you enough money to make repairs and updates.
A rehab loan covers the value of the property and the cost of your planned renovations. Rehab loans can help remove distressed, bank-owned and abandoned properties from the market. The loans put these homes in the hands of people who will restore their value and improve their neighborhoods. In the San Francisco Bay Area, rehab loans have helped reduce the abandoned and distressed property rates to pre-recession levels.
Ready to Rehab
A lender won’t offer you a rehab loan unless you seem likely to complete the job. To get the loan, you’ll need the following:
–Skin in the game: Lenders want to see that you’re committed to the project. You’ll need a down payment to demonstrate that you’re willing to spend your own money on the rehab.
-A clear plan for the property: This includes an outline of what you hope to accomplish, a realistic time-frame for the changes and a detailed budget. You’ll already need to have a reliable and respected contractor on board with the project.  Remember, lenders don’t want to fund failures.
-A workable idea: If your detailed plan for the property won’t actually add value, a lender won’t want to invest in your idea. Make sure you include the updates that are most likely to increase a property’s value.
Expect the Unexpected
Hard money rehab lenders like SFR Ventures Inc. closely examine your projected budget. Be precise. Make sure you understand how much each portion of the renovation will cost. Â When you calculate your budget, include a line for contingency money. Contingency money is extra funding for emergencies, cost overruns, and unexpected repairs. Because construction and rehab projects rarely go according to plan, your lender expects you to budget for unexpected setbacks.
Look for a Specialty Lender
If you want your project to succeed, you need a lender who understands the rehab process and the local real estate market. SFR Ventures Inc. specializes in large loan amounts for clients in the San Francisco Bay Area and throughout Northern California. Â We have the necessary experience and creativity to structure our loans to fit your situation. Â We are able to offer loans from $400,000 to upwards of over 3 million dollars. We often lend up to 65% of the ARV or After Renovated Value of your property.
Our team is ready to help you with your loan needs. Â We frequently check out properties within 48 hours of a loan application. Â We have readily available funding, and wait-free approvals.
SFR Ventures Inc. is located and headquartered in Northern California, but we do lend throughout the state. Â If you feel that a rehab or renovation loan is right for you or if you have any additional questions, call Beau Eckstein at 925-852-8261 or visit SFR Ventures Inc. on the internet at http://reiloanpro.com.