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5 Things to Look for In a Rehab Loan Lender
Selecting a private money lender is one of the most important decisions you'll make when making your foray into the fix and flip industry. The right private money lender can help you move forward with your business, leading you to better ROIs with each investment. The wrong lender can eat into your profits, take too long to fund investments, and stall any prospect of growing in this industry. When selecting your rehab real estate financing provider, here are five questions to keep in mind:
1. How long does it take for your lender to fund loans?
One of the factors you should consider most highly when choosing your private money lender is how long it takes them to fund loans. If you're working with a reputable lender, you should be able notified of your application’s acceptance or rejection within 24 to 48 hours. Once your loan has been accepted, it should take no more than two weeks to fund your loan. If a lender is taking much more time than that, you're going to have trouble securing the properties that are of most interest to you before your competition.Your lender should also be able to provide you with a letter of approval to help speed along your negotiations.
2. What loan programs does the lender offer?
Working with a lender that provides reasonable terms is key to maximizing your ROI. House flipping loans can range quite widely in terms of interest rates and points. You should expect to pay a bit more for a fix and flip loan than you would for a typical bank loan due to the nature of the investment. However that doesn’t mean you should settle for the first loan you come across. Expect to receive a better deal if you have successfully flipped homes in the past. Look for loans that are both from reputable lenders and that provide you with benefits based on your experience and personal capital. Avoid hard money loans whenever possible, as these loans tend to be less secure and have worse terms than money provided by private lenders. If a loan’s terms seem too good to be true, they probably are.
3. What's the lender's reputation?
Does the lender have a history of funding loans quickly? Do people who work with them tend to come back for repeat business? Look for a lender that has a solid reputation amongst other lenders, realtors, and fix and flip investors. If a lender won’t provide you with references from their current and past clients, start looking for another lender.
4. What can the lender offer beyond fix and flip loans?
You probably don’t want to work with a lender that claims to know everything there is to know about too many different types of investments, but within the world of property investment, what doors can your lender open for you? Do they offer loans sizeable enough for you to expand into luxury property investment? Do they have a buy-and-hold loan program? Look for a lender that offers you viable options for expanding and growing your investment portfolio.
5. How is the lender’s customer service?
Customer service may not make that much of an impact on your bottom line, but it will have an impact upon your mood. Find a lender that makes you feel valued and is prompt to answer any questions you may have. The last thing you want is to feel like just another loan number when you have hundreds of thousands of dollars riding on an investment.
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