Getting the Money to Go Green
Their are a variety of funding options available for those wanting to begin or continue energy wise residential remodeling. For those re-investing resources from traditional savings with yields of only a few percent, Green House Flipping clearly makes Dollars and Sense. Others may choose refinancing or to open a line of credit for their renovation project.
In any case, the rewards for energy wise residential investments can be substantial. This is particularly true for those following a well thought out plan, from purchase and remodel though the process of marketing and sales. Those with the foresight to remain flexible, increase their ability to maximize their earning potential.
Current rates and terms vary with interest rates starting from 5-6 percent. Terms can be found to meet most investors needs, including interest only loans with little or no points and low closing costs.
Where Do I Find the Money?
- Small Banks: Small, local banks with only a a few branches. My bank has only one branch. These banks pride themselves on local involvement and “relationship banking.” The president came to our first open house. These banks may offer a Line of Credit or may finance your project on a case by case basis. L.O.C. Rates are around 6% with 1-2 points. They will want to collateralize the loan with something: house, savings, other property etc…
- Big Banks: Wells Fargo offers a “Renovation Loan” that is designed for our type of work. They loan 80% of After Repair Value (ARV) for non owner occupied and 90% for owner occupied. This loan is offered at their mortgage offices, not in the regular branches. It is at favorable rates but has some fees, appraisal, inspections, etc… This loan takes 30 to 45 days to process so offer accordingly.
- Hard Money Loans: “Hard Money Loans” aren’t as had to come by as they sound. It may be the perfect solution for getting started, when collateral is not available. True Hard Money doesn’t care about your credit or savings. The loan is made totally on the merit of the property and as such they will take the property if you don’t pay. Less paperwork and inspections are required. BookView Financial caters to renovators offering 15% interest at 4-5 points. Getting qualified is a good exercise for beginners. You want to graduate off of this type of funding ASAP. The prequalification letter is valuable for making offers.
- Private Money Joint Venture Investors: Joint venture capital for a portion of the profits. There are tens of thousands of people who have funds that are earning 2 to 4% or less. Risk – profits are usually 50-50 but you can negotiate agreeable terms. Collateralization can be through title of Grand Deed. Be careful to do the math ensure this is the right choice for you.
- Private Money Interest Only Investors: Rates are generally between 9-12%. Some lenders may want points. Investors security can again be in placing the property in the name of the the investor on title. Multiple investors can be cultivated allowing you to show without fundraising pressure. Investors keep their money available. You find the deal. They wire funds to the escrow company. You renovate and sell the project. They are paid their interest. You keep the profits.
- Commercial Credit Cards: Commercial credit cards usually have a ceiling of $50,000. You can get multiple accounts. It’s a good idea to have these in the background in case other sources dry up or don’t come through as planned. Google, “Commercial Credit Cards” or visit Cardratings.com.
- IRA’s and 401k’s: These accounts may be earning very low or even 0%. This money is not normally available for real estate investments but if certain custodians are selected, for “Self Directed IRA’s” the money can be invested in real estate. As with all investing it’s good to get professional advice.
- HELOC: With a Home Equity Line of Credit you only pay for the interest you use. Rates and terms can vary greatly. Credit Unions may be a good source.
Additional Financing Information
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