NUTS & BOLTS
LENDING
MAJOR BANKS AND FINANCIAL INSTITUTIONS OFTEN JUST DON’T MOVE FAST ENOUGH OR LEND LARGE ENOUGH AMOUNTS FOR A FIX-AND-FLIPPER. Need forSpeed
by Lawrence Fassler
any investors have developed lucrative careers by in- vesting in less-than-perfect residential or commercial properties, renovating them and reselling (or renting) them for a profit. The real estate market has now turned around, and although foreclosures are on the decline, good fix-and- flip deals remain available. If you’re such an investor, or a mortgage broker trying to help these investors, you likely know that the usual sources of financing—major banks and financial institutions—often just don’t move fast enough, or lend large enough amounts, to help these investors with the quick, “in-and-out” financ- ing they require. And local hard-money lenders usually don’t have the corporate bona fides to justify your comfortably steering your clients toward them. M Investors utilize a much broader range of potential property acquisition sources than do most buyers. Lists of repossessed properties available from the U.S. Department of Housing and Urban Development, local banks, trustee sales, tax auctions, sheriff ’s sales, probate attorneys, bankruptcy and divorce attor- neys all can be ways of finding properties and sellers who want to off-load them promptly. Finding these motivated sellers is not enough, though. These markets are also competitive, and investors can lose a good opportunity if they’re not able to show evidence of financing in hand or to subsequently close promptly on a purchase. REHAB LOANSAREADIFFERENTANIMAL Fix-and-flip investors not only need access to money fast, they also don’t want to have to worry about the condition of the property disqualifying them. Some of the best fix-and-flip deals are in less-than-stellar shape. Conventional lending sources, though, often want all the repairs buttoned down before they’ll EFFICIENT DEAL SOURCES REQUIRE EFFICIENT LENDING
consider lending—or if they do loan, base their loan amounts only on the purchase cost of the property. But a rehab investor needs the repair costs financed as well. Traditional lenders also can be slow-moving; good deals go a lot faster than a commer- cial bank can approve a mortgage for the property. The usual lending sources just aren’t a fit.
72 | think realty magazine | mar :: apr 2016
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