We all receive a lot of queries related to the purchase price, repair costs and offer price of the properties. People need to know the calculation process employed by direct hard money lenders for making an offer because it is a known fact that hard money lenders only provide 70%of market value after the repairs have recently been completed on a property. List Licensed Money Lender Singapore
First and foremost, you need to realize that the offer price and repair costs are two separate containers of money.
Lenders can fund you up to 100% of these two containers but both of them should be equal or less than 70% of ARV (after repair value).
This will not mean that you will all the money together for closing the deal.
You will get a particular amount of cash for purchasing the property at closing desk and the repair money will be deposited into an escrow account after the deal is shut down by a hard money lender.
If you are in a perfect situation, you won’t have to incorporate any money as repair costs into the offer.
Let me describe this in detail.
It is very important to find out what kind of repairs you are willing to do and get an approximation. After that you should determine the ARV. You need to take 70 percent of after repair value and subtract the repair costs.
This is the maximum amount which you are going to get as a deal and still get financing for the purchase price and repair costs.
On the other hand, you need to be very careful while estimating the repair costs and ARV.
Nevertheless you need to keep in mind that the final amount of EJENDOM and repair costs would be based after what have been finalized by direct hard money lenders, not you.
This is usually quite different from the calculations of an investor.
Lenders usually work with the services of two different property evaluators to look for the EJENDOM and repair costs. Both equally of them send more than a dozen comps after evaluating the exact property.
This kind of is an extremely effective system for deciding the ARV and repairs, which is followed by few lenders like us.
Therefore, if you are fine with putting some money down or spend money on repair costs of the home, you can amend the offer price.
Another important thing, which you should keep in your brain, is the fees that are credited during loan closing because direct hard money lenders will not finance that. This would be between 4-6% of the total loan amount and you are going to have to pay it from your pocket.
The crux of the tale is that you’ll have to work with several different offers before you get the numbers that make sense.