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Art of Rehab. Loan
Have you ever had a buyer ask you how they can buy a property that
was in need of repair??? Ever driven through Anycity, USA and witnessed
contractors fixing up previously abandoned homes or shells and wonder
how the buyers got the financing??? Did you think that it was just
the "big time" investors who got those loans? Or the buyers
needed a ton of cash? Or, you'd never have access to that type of
lending??? Well¡ it's time for a new perspective. At
Gelt Financial, we are experts on the rehab. Loan. We close to 500
under our belt, I'd hope that we would be by now. Here's how it
works. We'll finance any type of property: sfds, 2-4 units 5+ units,
mixed use, commercial, etc. The only property we will not lend on
is an owner occupied. We lend our money to investors only. We lend
up to 65% of A.R.V. (After repaired value). If that's enough to
cover the purchase price, rehab. costs and closing costs, the buyer
needs no money. Let me say that again¡ you can buy and
rehab. a property with virtually NO MONEY!!! Let's take a look at
a practical example.
Purchase Price: 70,000
Rehab. Cost: 50,000
Closing Costs: 10,000
Total needed: 130,000
A.R.V.: 200,000
Gelt will lend 130,000 The buyer doesn't need any money!!!
Now, I know what the next question is. What are the qualifications
for someone like this? Do they need a 720 credit score and a
10% debt ratio? Actually the truth is there's no minimum credit
score and we don't even run a debt ratio. We're a private, portfolio
lender. We don't our loans. We underwrite ever deal ourselves. The
only income or credit qualification that we have is that we have
to believe that the customer will pay us back. That's it¡
nothing fancy.
Now I bet I know the next question¡ what does it cost?
Our typical rates are 15% with 5 points and a 3% exit fee. NO PREPAYMENT
PENALTY. Sounds expensive? What if I can prove to you that it's
actually cheap??? Sounds crazy? Let's go back to our example.
Assuming that our buyer would turn the property in 6 months, he
would have paid me interest of $9,750. Plus the points & exit
fee which is $10,400. That totals at $20,150.
Let's look at a different alternative¡ Let's say that
he called his cousin Bill who's a doctor. Bill agreed to lend him
the money at 8% with no points¡ great deal, but Bill
wants HALF THE PROFIT. That means $5,200 for the interest and $35,000
for his share of the profit. That combines to over $40,000. Or the
other alternative is that he doesn't borrow the money, doesn't buy
the property and makes nothing.
How do brokers make money? Most of our brokers charge between
3-5 points per deal. The only thing you need to do now is call every
investor you know, tell them what you can offer and we can start
closing loans.
Published in The Mortgage Press in January 2005
Contact Information: Ari Miller; Gelt Financial Corporation; 800-355-4358,
ext. 275 or AriM@GeltFinancial.com
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