The goal of a fix and flip is to purchase a property and make needed repairs and renovations before reselling the property as quickly as possible. Any delays in the process will decrease the value of your investment due to holding costs such as loan interest, property taxes, and utility costs.
Get familiar with the local real estate market before deciding if you should buy.
“A fixer-upper is a good buy when you have at least three similar properties that sold in the same subdivision, preferably within the last 90 days and within a quarter-mile radius of the subject property,” said Jesse Anokwuru, a real estate investor and loan officer at Tidal Loans.
So, you found the perfect real estate investment property you want to hold as rental investment. You got a sweet deal on the property, executed the contract, called us at Tidal Loans for a hard money rehab loan. We funded the property fast, closed the loan with no money down, completed all construction draws and have the property on the market leased for above market rent! Everything is perfect, just need one more step. You need to refinance the temporary hard money loan to permanent financing. It’s a very important step for real estate investors, because the higher rate on the temporary loan will hurt the property’s cash flow. The mortgage rates on conventional loans tend be lower. Here is how Tidal Loans assist our clients refinance their hard money loan.
Debt Service Coverage Ratio* (DSCR)* is the amount of cash flow available to meet annual interest and principal payments on debt.
=Net Operating Income/Debt Service
Example:
Noi: $15,000
*Annual Debt Service* $10,000
*Debt Service Ratio*= $15,000/$10,000=1.5
This number is not very important for residential Hard Money Lenders and Private Residential Lenders. However, it is a very important number to Commercial Real Estate Lenders and Banks. The Debt coverage ratio measures the project/company ability to maintain its current debt. That is why the higher the number the better.
Before you start your real estate rehab it’s important to get a game plan on exactly what and how you will rehab your real estate investment property. Running MLS Comps, studying the sold and active comps, are critical steps in determining the rehab needed for your real estate investment. Proper planning prevents poor performance.
Investing in real estate is a solid way through which a person can diversify his or her portfolio. Some people balk at investing in real estate because they fear that they simply cannot come up with the money necessary to make this type of investment. There are strategies you can employ in order to invest in real estate with little money up front.
