A rehab loan is one of the most exciting for home buyers who are looking to transform a tired older property into something shiny, new, and exciting once again.
Whether borrowers are interested in transforming an old Victorian home that has seen better days to something resembling its former glory or dividing it up into apartments for college students in a town where there is a huge shortage of student housing, it is easy to get caught up in the excitement of the possibilities.
But that’s only part of the reason so many private lenders and hard money investors find rehab mortgage loans to be good business deals. Below are just a few reasons why hard money rehab loans are so exciting for investors today.
- Low-Risk Investments
Because lenders set terms with extensive collateral before offering borrowers a rehab loan, there are far fewer risks involved. In fact, it’s difficult to find any type of investment that offers fewer risks once the collateral is considered. This is assuming you’ve done your homework in securing an accurate collateral valuation before offering a loan or accepting the collateral offered.
- Shorter Repayment Period
This is one that many investors find worth writing home about. Most home rehab loans are for six months to one-year maximum. This means investors will have their money back plus interest within a 12-month span of time. Very few ventures in the stock market, mutual funds, and other investment types offers the degree of profit in such a short amount of time.
- Higher Profit Potential
Most investments offer far less profit than the average hard money lender can earn by funding private money mortgage rehab loans. The interest simply isn’t high enough on savings accounts, CDs, and many mutual funds. Even most retirement savings offer conservative interest rates, at best. Investing in rehab loans offers lenders the opportunity to earn maximum profits in a short amount of time – something investors find easy to get excited about.
- Motivated Borrowers
Because the collateral is so high on most rehab loans, borrowers are motivated to stay on task and on target when it comes to loan repayments. They don’t want to lose their collateral and most of them have a vested interest in the property being rehabbed since, for many borrowers, it is a labor of love to a larger degree. This means they won’t act foolishly and place their project at risk by doing so.
- Thrill Factor
There is something a little thrilling about investing in the transformation of an older property. Something about taking something old and making it new again. While investors may not be getting their hands covered in plaster or drywall mud or splattered with paint, they do play critical roles in the transformation. In fact, it might not happen without them and their investments in the property and the person rehabbing it.
It’s easy to see the appeal of investing in real estate rehab loans. There are few things that can be more exciting than getting paid to do something this fun. Once the full scope of the profitability of this type of project sinks in, it will be difficult to stop at just one.
Let us help you connect you with people looking for lenders like you to help them get the funding they need to achieve their home rehab goals.