So you found the perfect “Rehab or Flip Deal” and can't find a traditional bank to lend or approve the financing because of the large amount of repairs that need to be?
That is when you need to utilize the deep pockets, easy lending criteria and quick closing services of a hard money lender that will finance a rehab loan instead of a bank. Every hard money lender has a set of requirements to fund and close a rehab loan. When approaching a hard money lender or even a private lender it is a great idea to have a prepared “property report” that includes some of the basic information required by most hard money lenders.
5 Basic Document Requirements of Hard Money Lenders
1. Photos of the Property:
Take photos of the exterior and interior of the property. Take extensive photos of the property areas that will be repaired , replaced or removed. Digital copies and a walk through video will suffice.
2. Bid for Repairs:
Contact a local contractor, handyman or repair specialist and get written estimates. Don't worry if you plan on painting and doing the make-ready yourself – still get a bid for repairs to give to your potential hard money lender.
3. Purchase Contract:
This is a given. They will need to see signed copy of the purchase contract. Also include the title company and special escrow funding instructions if any. It's okay if you don't have a signed copy as of yet if financing need to be established first. Showing them a copy of the contract you plan to use is still a smart move and will make your “property report” look compete and legit.
4. Proof of Insurance:
Have an insurance agent provide you a quote for liability and hazard insurance for your hard money lender. This will insure that the lender will be repaid in the event of severe act of vandalism or catastrophic lost that occurs.
5. Preliminary Title Report:
If you have a “preliminary title report” or confirmation that there is not a clouded title share this information with the potential hard money lender. This document is a tricky one. Some hard money lenders “prefer” to work with certain Title Company. Don't outright purchase title insurance or a full certified report – would not want you to waste money.
Hard Money Lenders of course have their own internal and unique set of requirements based on their lending area, property purchase price, commercial vs residential, and loan repayment terms.
Always best to approach a hard money lender as an informed and serious real estate investor. Take the time to put together a “property report” using this “5 Basic Document Requirements of Hard Money Lenders” cheat sheet. You can use: Word, PowerPoint, Pages, YouTube and WordPress(free web page) to create your report to get your real estate investment deals funded quickly. Being prepared will get your deals funded quicker and at times at 100% of maximum lender funding ratio.