Creating Budgets for Real Estate Investment Loans

Transcript (auto-generated)

Hi, it’s Akinyi from Western Capital here to help you build your real estate investment portfolio. And today we shall talk budgets. One of the first things we ask for when you call us about a rehab or a new construction loan is the address and the current as is value of the investment property you’re looking to buy or refinance if you already own it.

Then we will ask for the ARV, which is the after repair value, along with the budget needed to get it to that end value. Detail is key because it shows underwriters that you are clear and organized about exactly what you will do on day one after closing. Also, if you know what finishes you want, such as the kitchen appliances, bathroom faucets, granites, or flooring type.

This feeds right into the appraisals output in the ARV that they will produce on the evaluation. It helps too if you look at comparable sales with similar finishes before you buy, so that you know that your hard work will pay off and that you are not over or under-fixing. A realtor can help you with this.

Rehab loans work as reimbursement. Even if it’s a refinance, this process means that you use your own money up front to do the work, then the lender reimburses upon completion of a certain phase when you request for withdrawal. So a detailed budget with phases help the lenders track the completed work and to facilitate withdrawal requests.

Lastly, lenders don’t prefer to extend further credit once their loan has closed and the project has begun. So you don’t want to run out of money halfway through the project. We don’t want you to become vulnerable to loan sharks to breed you through. So give yourself room in this budget in case of unplanned incidents.

Or if you underestimated some phase of the work, you will also need some room. A contractor can help you with this. So give us a call today.