Some fix and flip investors will fund their projects with cash on hand. Most, however, are looking for debt to leverage their existing cash on hand. There are many ways to obtain leverage for a rehab deal. California ARV hard money lenders are one such direction investors may wish to explore.
Being able to leverage cash on hand is important for a number of reasons. For new investors, leverage may be the only way to get into the fix and flip space - especially in the California real estate market. For more seasoned investors, utilizing leverage may allow for them to take on multiple projects concurrently. Additionally, utilizing leverage can allow investors to retain cash on hand in case of overruns - or to retain the flexibility and liquidity to take advantage of new opportunities that may present themselves.
For new investors, ARV hard money lenders offer a way to get into the fix and flip business with lower cash out of pocket requirements than other financing options may provide. This is due to the way ARV loan products are structured. Most loans - both conventional and hard money - are based on the current value of a property. ARV loans, however, are based on the completed value of a property that is in need of rehab work.
The ability to base a loan amount on the completed value of a property rather than the current value or purchase price inherently provides higher leverage. The loan is being made based on a higher dollar amount, so the loan amount is typically going to be larger. There are more moving parts involved with the loan structure, but the ARV based hard money loans are typically going to require less cash out of pocket for the full project than financing with a more traditional product.
For more seasoned investors, the ability to take on more projects adds scalability to their business model. Bringing less cash into each rehab project by utilizing an ARV based loan means more completed rehab projects, and larger profit potential. Additionally, using a hard money after repair value loan product means there is not typically going to be a cap on how many properties can be financed.
Many conventional loan products cap how many properties can be financed by a borrower. Hard money ARV lending programs, however, typically do not have this type of cap. Removing this cap and providing higher leverage is one way more seasoned investors are able to leverage private hard money fix and flip loans to expand their rehab business and close more projects.
For any rehab investor, having cash on hand is very important. Overruns on costs, overruns on time, unforeseen issues, etc. all come into play - even for seasoned investors. By utilizing an ARV private money loan product, investors can minimize cash brought into any particular deal upfront and retain cash on hand for contingency purposes.
We specialize in private hard money loans throughout the state of California, including ARV hard money loans. We can help first time investors, as well as seasoned investors in obtaining an ARV hard money loan for your project. Feel free to give us a call or email anytime, we are always happy to discuss specific scenarios, as well as answer general questions about alternative loan products.
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