Many of the most successful real estate investors use “other people’s money” (short-term interest-only loans) to purchase and rehab their projects. Then they pay back the loan when they sell the property, or refinance rental property into a conventional mortgage. This strategy gives them the ability to go about their business with less of their own money out-of-pocket.
Following are tips for being a strong borrower with Houston Real Estate Lenders.
Know the Property: Location, location, location. Is the property in an area that’s appreciating? How long are the homes in the area typically on the market? Was it a foreclosure that sat vacant for an extended time? Has it been vandalized? Is the plumbing and wiring present and in good shape? What about the roof? Is there moisture and mold? All these factors can impact the After Repair Value (ARV). The ARV will be an important component with Houston Real Estate Lenders.
Have a Handle on Repair/Rehab: Some investors do their own repairs, but many use contractors. Be sure you select contractors with good references and good credit references. Don’t go too far with upgrades. Stay within the norm for the neighborhood. Get bids and then anticipate running over budget by about 10%-15%. If you don’t run over, all the more profit for you! Your repair estimate will be an important factor to Houston Real Estate Lenders when calculating your loan.
Be a Strong Borrower: While the value of the real estate asset is key to qualifying, other factors strongly influence the terms offered by Real Estate Lenders. To receive the very best terms, you need to show enough liquid cash reserves to repair the property and pay for your personal and investment-related expenses for 6 months. Your credit score is taken into consideration. The higher the credit score, the better your terms will be. In addition, if you are acquiring rental property, you want to ensure that you can qualify to refinance into a long-term mortgage once the purchase and rehab are complete.
Documentation: Get your documents together in advance. Houston Real Estate Lenders will be interested in recent bank statements, pay stubs, tax returns, and ID. The more you show, the faster the process will be and the better your terms will be.
More questions about hard money loans and what Houston Real Estate Lenders are looking for? Give the experts at ZeusLending a call at 713-ASK-ZEUS. Ask away. We love questions!