Real estate prices on distressed or vacated properties are an all-time low, with properties available at deep discounts ranging from 10-50%. Real estate investment is thus, a hot favorite among many. However, the major catch here is finance. As these properties are mostly sold on cash on sale basis, you can get the best deals if you pay in cash. So, keep your finances ready before making a deal.
The Good and Bad
The bad news is that most traditional lenders and banks are reluctant to provide loans for foreclosure investing. So, the only possibility available for you is private money. How about asking family for a private loan? Can you approach a dear friend for the investment amount? To insure they recover their loan They would draw up a contract and most likely charge an interest rate of 8-10%, or be considered a co owner. Compare this to the prevailing interest rate of 10-15% for private money loans. You could make them the first mortgager and make monthly payments to them. They act as your bank.
The good news is that, similar to your dear friend or close relative is another private money lender, commonly known as hard money lender. Hard money San Antonio is easily available with private money lenders. Yes, the interest rate charged by them is often high, commonly in the range of 10-15% per annul. Add to it 2-3 points up front. Is it feasible to borrow from these lenders? Why would anyone take a loan from them at such high interest rates?
Reasons for borrowing hard money in San Antonio
- They are professionals. Unlike your relatives and friends, you need not request or beg to get a loan. Their primary motto is to encourage real estate investment by providing investment loans to investors.
- You can borrow with dignity.
- With cash readily available, you can acquire the best properties.
- Hard money lenders do not demand income statements, credit scores and the like, unlike banks.
- They provide the loan on the mortgage of the investment property.
- They process the loan within a period of 24-48 hours or maximum a week. You will not lose a property for lack of finance.
- The loan amount often includes the cost to repair the property as well.
A win-win situation for all
Purchasing real estate with private investors’ money is a “win-win” situation for all. Let’s assume you purchase a property whose market value is $78,000 for $40,000. If the interest rate is 15%, the monthly interest payment works out to around $500 per month. Let’s say you hold the property for 6 months and sell it at an attractive $75,000. You have made a gross profit of $35,000, after paying the loan amount of $40,000. You deduct the cost of the loan on your annual tax statements as part of the expense in flipping the property.$35,000, after paying the loan amount of $40,000. You deduct the cost of the loan on your annual tax statements as part of the expense in flipping the property. The total interest amount payable in a span of 6 months is $3,000. Let’s assume the commission charged by the Realtor is 6% and buyer closing costs are 6%. The total costs calculate up to (3000+9000 (interest + the closing costs + Realtor commission)). Therefore, the total profit comes to $23,000. This is the profit for flipping by a wholesaler. You can even buy the property, rehabilitate and sell it yourself. Yes, additional rehabilitation costs are incurred, but the property’s value also increases. However, the only catch is to get a property at such an attractive price.