With rehab transactions there is often times a need for specialized financing, especially in the California real estate market. Ca purchase rehab loans are a special type of loan tailored to fit the needs of the short term real estate investor.
Typically speaking, a purchase rehab loan is going to finance both the purchase and the cost of the rehab needed in order to improve the property to the point where it can be sold to an end user for a profit. This can include simple curb appeal and cosmetic improvements to additions and everything in between. Many times, with the banks continuing their tight lending standards, the rehab is simply to bring the property into compliance so that a consumer can qualify for a bank loan on the resale.
When looking at purchase rehab loans, there are a few things to be aware of. First of all, they are short term loans. They are not meant for the long term buy and hold investor, and are usually going to be due in 12 months or less.
Second, the rehab funds are typically held in a fund control account. It is important to know upfront how you will be able to access this account. Some firms require the work to be done, inspected and then they release funds to reimburse you, while others will give you advance draws to do the work.
Finally, the basis for the lending can differ from other loans. Most loans are made on what is termed an ‘as is’ value. On a purchase, this is typically equal to the purchase price. With a purchase rehab loan in California, however, we are able to lend based on the ‘after repair value’, or the future value of the property. This helps us put together more aggressive loan amounts, simply because the value we base our lending on is higher than the purchase price.
For those looking for a purchase rehab loan, give me a call today at 877 462 3422. Or you can learn more by visiting our Ca rehab lending page.
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