Helpful Hints

Creating a Realistic Rehab Budget

March 5, 2018

Whether you’ve watched a lot of house-flipping TV shows or have recently become interested in investments, there’s a lot you need to know before picking the perfect home to rehab and resell.

How Do I Determine A Worthy Investment?

• Never invest more than you can afford to lose.
• Divide your budget into sections: 1) property cost, 2) upgrades/rehab costs, 3) selling costs, and 4) cushion.
• Establish how much time you can realistically devote to the rehabilitation process, and steer clear of properties that will cost you too much of your time.
• Compare buying, selling, and renovating costs for multiple properties before deciding on one.
• Choose a home that leaves you with enough money to complete the renovations and upgrades necessary to sell it at a significantly higher price than you purchased it for.

What are Hard Money Rehab Loans?

A hard money loan is an asset-based loan that allows you to receive a large sum of money in a short amount of time. Instead of being based on income or credit scores, hard money loans are based off hard assets. Rehab loans are those used specifically for purchasing, fixing up, and reselling properties. Because the house flipping process is best completed in a short amount of time, a hard money rehab loan is perfect for these investors in particular.

If you want to turn a decent profit after purchasing, rehabbing, and selling a home, the key is to pay off your hard money loan quickly. What’s the best way to accomplish this?

• Use Proceeds from the Sale. If you buy a fixer-upper at the right time, chances are you’ll get a great deal and will be able to sell it for quite a bit more than your purchased it for once you’ve updated it. The point of flipping houses is to make a profit, so pull from the money made from selling the home to cover the cost of your loan.

OR

• Transfer to a Different Loan. If you’re rehabbing a property with the intention of renting or leasing it, you’ll still want a hard money loan in order to get the money you need to purchase and fix up the home quickly. However, once you have found a tenant, it’s advisable to switch to a longer-term mortgage that can offer a better interest rate.

Maryland Private Mortgage is your local resource for Maryland rehab loans. We are the leading Baltimore private money lender and our professionals have the experience and knowledge necessary to help you make smart financial decisions when purchasing rehabbed properties. We offer fast funding and can close on your loan in as little as 7 days. Contact us today to get started!