Hello friends, I do flip-flops in Philadelphia and also work as a direct hard money lender. I'd be happy…
Hello friends, I do flips in Philadelphia and in addition, work as a Direct hard money lender. I would love to share with you my experience in both real estate and hard money. I will try to give short tips that can save you money and time.
Hard Mani, Flip, and everything in between.
ARV- After Repair Value is a concept in the field of plaifs
When an investor wants to take financing for a flip, he will usually have to use Hhard money lende. That is, financing from a non-banking company. The reason for this is that banks consider the flip as a risky transaction and therefore will prefer to avoid these transactions. Banks believe that it is not possible to give an opinion and valuation of a home before it has been renovated. Most often, hard earned loans are around 10 + 2 - 12 + 2. That is, between 10-12 percent annual interest + the price of the loan which is two percent of the total of the loan (this is the meaning of 10 + 2). In this context, it should be noted that in each company the closing costs are different and therefore it is important to ascertain in advance what the closing costs are. Sometimes it is precisely the companies with 10% interest that can be more expensive loans due to the closing costs, which is known as Closing fee. Therefore, it is important to read and peruse the documents before signing the loan documents. Using an attorney can be very effective as he can tell you for sure what the closing costs of this type of loan are. As stated, the use of an attorney is always a desirable thing and is also recommended in countries where there is no obligation to use attorney services in purchase and sale transactions.
The financier will send an appraiser who will evaluate the value of the property after the renovation. (It is important to know that in the United States property prices depend, among other things, on the nature of the renovation). In order to know in advance whether this is a worthwhile transaction, a simple mathematical calculation should be made. Investment value, purchase + renovation + financing expenses not exceeding 70% -65% ARV.
Example: I purchased a property in the amount of 100K, I added 50K for renovation for a total of 150K. In addition, the financing expenses must be calculated, which is about 14% interest of the total loan (hard money companies usually allocate up to 80% financing). The value of the property after the renovation should be about 230K.
And of course the price of the UAV must also be added, which is usually around 10%.
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Property value should be after the renovation 230 for us to earn some ??
Thank you!
Question - 10% interest per year. Does that mean that if the project takes half a year I pay half?
Yaron Cohen
Why do you think the Philadelphia market has so risen in the past two years?