With reports of record foreclosures, and more to come, now is a great time to be purchasing investment properties. Many of the investors I work with have been utilizing Rehab Loans. They are great for properties that have good potential, but need work. Distressed properties are great because you can get them for a fraction of the value.
With a Rehab Loan you can get cash at closing to do the repairs necessary to help fix and sell the property. The investor gets up to 80% of the After Repair Value. This gives plenty of cash to the investor and protects the lender (to an extent) if the loan defaults.
Quick breakdown of Rehab Loans (example):
Purchase Price - $100,000
After Repair Value - $200,000
Loan Amount - $160,000
You will have $60,000 after purchase to do the repairs, then you can rent or sell the property and gain the difference. The key is finding properties in areas that have good potential.
I hope this helps anyone out there needing any information about Rehabilitation Loans.
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