Race Cars, Cheetahs, and Fix-and-Swap Loans: The Need for Speed

Speed ​​matters. It could be the difference between winning the Indy 500, going to dinner tonight, or turning a profit on a real estate fix-and-change project. Many real estate investors turn to hard money loans to finance the purchase and renovation of rehab properties, and the need for speed is one of the main reasons.

How can you “win the race” in the world of real estate renovations?

Renovation projects are extremely time sensitive and require funding sources that can respond quickly. This is why:

· The fastest money gets the deal: In a high-density area like Washington DC, the competition for the right properties to fix and turn around is intense. When inventory of foreclosed, abandoned or dilapidated homes comes on the market, it is often the developer with the quickest access to financing who gets to keep the property. If you can’t arrange financing in a couple of days, you may be missing out on a great deal.

TIP: The US Department of Housing and Urban Development website has a portal that lists all foreclosed properties in the country. Check it out to see what’s available near you.

· Scheduling your Sale: In most areas, the optimal time to sell a fixer-upper is limited to a multi-month buying season, typically beginning in early spring. This means that you should ideally time your purchase and completion of the rehab to coincide with the selling season. A quick private loan, available as soon as you need it, is the key to timing your rehabilitation project. A recent Zillow study puts the magic window to sell between mid-March and mid-April, depending on variables like location and weather. Homes sold during this window sold 15 percent faster and for 2 percent more. That’s real money in your pocket.

· flexibility: Fix-and-reverse or construction loans are often structured on a draw schedule, so funds are released each time you reach a certain benchmark (permits, framework, etc.). This ensures a constant flow of funds throughout the project. However, cost overruns and construction delays can occur, and developers often increase the scope or schedule of the project after initial funding. Whatever the reason you need additional funds for your project, waiting for a new loan can delay the project. Hard money loans can be structured to include multiple phases, using phase two or three only if necessary, and the money can be disbursed as soon as the same day, so there is no interruption to your project.