One Where, Everyone Wins
We want to help fund your investment projects. So, we’re sharing key insight on what lenders look for when striking a deal. Remember, if the lender doesn’t see the value, then it’s a good indicator that you might want to think twice about the viability of making money on that project too! Here’s what makes a good deal through the eyes of the lender:
The down payment compared to the purchase price – The more the merrier in terms of what you have to contribute. When investors are seeking 100% financing it raises a red flag for lenders. It’s to everyone’s advantage for both parties to have some skin in the game. Additionally, it motivates each party to move the project along.
The renovation cost compared to the purchase price – A good rule of thumb is not to exceed 50% of the purchase price. From the lender’s prospective the collateral for producing an asset-based loan should have value throughout the entire project. The scenario both parties want to avoid is: an investor attempts a complete gut or tear down of a property, and then can’t finish the project, the lender has to attempt to sell a property that has less value then the loan amount. Smaller projects also pose less risk for those new to investing.
The overall condition of the property – As the lender we’ll evaluate the property from the following point-of-view, would we like to live there ourselves? Not only do we look at the condition of the home but we consider the neighborhood in terms of location and safety. These are questions you should ask yourself too. Remember, even if the end goal is to rent the property, the lender still has to consider its ability to be sold in the event that the investor defaults on the loan.
Location – You’ve heard it before but we’ll say it again; location, location, location. Properties near/on water are the easiest to fund. Properties in major cities are also easier to fund simply because the market is larger making it easier to unload a property and finally, due to the fact that the values of the homes in these areas are typically higher.
We acknowledge there’s many other factors. However, keep these four things in mind as you search for your next investment property. Then, keep us in mind as your private lender! Questions? Contact us today, we’re available by phone (860.670.4309), email or live chat.