How to finance investment property renovations

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How to finance investment property renovations
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• As a real estate investor, can you get a rehab
  loan for an investment property? The answer is
  YES! There are various types of renovation loans
  for investment properties that investors can
  qualify for. Real estate investment is capital
  intensive and rehab loans help investors fund the
  purchase and renovation of residential
  properties.

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• For short-term real estate investors, renovation
  loans for investment properties help them to
  quickly fix-and-flip properties. Long-term
  investors also benefit from renovation financing
  for rental investment properties.
• Renovation loan for investment property comes as
  a single mortgage package that comprises of
  property purchase and its rehabilitation costs. A
  rehab loan for property financing offers real
  estate investors quick funding and its payable
  based on agreed interest rates.

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• Types of rehab loans

• Rehabilitation loans are also known as renovation
  loans for investment properties. They are majorly
  offered in various categories to cater to the
  needs of both short-term and long-term investors.
  The most common types of rehab loans include

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1. Hard money renovation loans

• Hard money renovation loans are suitable for real
  estate investors seeking short-term financing
  options. Short-term investors mostly deal with
  fixer-upper properties. Unlike the traditional
  lenders who pay attention to your credit score
  and income, hard money lenders make loan approval
  decisions based on the value of the collateral
  provided.

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• Hard money lenders offer different lending rates
  and investors can get financing of up to 75 of
  the propertys after repair value (ARV). Although
  hard money renovation loans attract higher
  interest rates and shorter repayment periods,
  they are processed much faster and you can get
  the required financing within a few days.

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1. Investment property line of credit

• Investment property line of credit renovation
  loan is tailor-made for real estate investors who
  own properties that require constant financing.
  The investment property line of credit operates
  the same as the home equity line of credit.
• If an investor already owns a property, they can
  use the home equity to finance renovations of
  their newly acquired properties. Lenders allow
  investors to borrow a certain percentage of their
  propertys equity multiple times.

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• An investment property line of credit is secured
  by the already owned property and its usually
  offered at a lower interest rate. In addition,
  investors enjoy longer repayment periods for up
  to 30 years.
• To qualify for an investment property line of
  credit, real estate investors must have a high
  credit score, considerable equity in the property
  as well as a low debt-to-income ratio.

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1. FHA 203 (K) permanent renovation loan

• Federal Housing Administration (FHA) 203 (K) loan
  is suitable for real estate investors who would
  like to renovate a home for their own use. Its a
  better option since investors get financing as
  one mortgage package as opposed to applying for
  multiple loans.
• FHA 203 (k) loans allow investors to finance the
  purchase and renovation costs of a property as a
  package.

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• Since 203 (k) renovation loans are insured by the
  FHA, they are offered to real estate investors at
  affordable interest rates and longer repayment
  periods.
• For any investor to qualify for FHA 203 (k) loan,
  they must engage an FHA approved lender and have
  a credit score of 500 and above. Also, the cost
  of home renovations must be at least 5,000 and
  the property value should be within the
  recommended FHA mortgage limit in your area.

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1. Fannie Mae homestyle renovation loan

• For those investors who are looking for
  flexibility, this home renovation loan is another
  great choice. It allows investors to borrow up to
  85 of their home value after renovations or
  after repair value (ARV).
• However, its a must that all renovations be
  completed by an approved contractor.

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• An appraisal of the renovations is also required
  before the contractor gets paid. Also, Fannie Mae
  Homestyle renovation loan requires a higher down
  payment compared to FHA 203 (k) loans.
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