ARV Rehab Loans - The Skinny
We get lots of calls each day from people looking for ARV or As Repaired Value rehab loans. For the record, there are a handful of people that like to do these deals out there. However, what most people seeking these loans don’t understand is that just because they are dealing with a private money lender / hard money lender that they get money just for asking for it. Most of the time the call goes like this:
Caller: Hi, I need a hard money loan for a property I am buying from the bank.
Us: We can help you with that. Can you tell me a little more about the deal, ie: purchase price, loan needed, rehab funds needed, etc.?
Caller: Well, I am buying it from the bank and it is worth $750,000, but I am able to buy it for $500,000. So, I need a loan for $500,000 to buy the property and then another $100,000 or so to rehab it.
Us: Okay, what kind of money are you putting into the deal?
Caller: None, I need a hard money loan for the whole purchase price. But, the property is worth $750,000.
Let’s stop the call example right here. This is where most people lose contact with reality. First, just about every lender I know is going to want the borrower to have some “skin in the game.” Translation, you have to put some cash into the deal for us to be involved. Yes, I know, you believe that that property is worth $750,000 fixed up or even more than you are paying for it. Without something to keep the borrower honest and tied to the property (aka: Cash into the deal), lenders will walk from the deal. Using a private investor or hard money lender to obtain funds doesn’t mean that you simply ask for the money, tell the lender that you are getting a smoking deal, and then they cut you a check. There is still work involved, due dilligence that needs to take place and parameters to follow. With that said,ARV loans are readily available.
So, how do you get an ARV rehab loan?
Here are a few parameters to follow:
- Do you have cash into the deal?
- Are you purchasing the property for 65% (or so) of the future appraised value? You can expect to get this amount of dollars from a private lender on an ARV deal. So, you either need to get close to this number or come in with more cash to cover the rest.
That is most of it. Those two items are the most crucial. If you have deals that meet these two parameters, then we can most likely get you funds to purchase as well as funds to do the rehab work necessary to complete the project. Please call us at 415-839-8444 or better yet, get the ball rolling with some information about you and the deal.
tags: arv loan, financing, hard money, real estate, rehab loan