How to Profit from Rehabbing Houses Using Other People’s Money

Rehabbing HousesIf you have only experienced getting a mortgage to buy property and you’ve experienced difficulties from time to time, then you will be delighted to learn that there’s always the hard money lender to turn to. What is a hard money lender? Hard money lenders are people or companies in some cases (in a lot of cases), that have a lot of money lying around. It’s a situation where, specifically, they target people who are involved in rehabbing houses. They will loan you the money to buy a house, and they will also loan you the money to rehab the house. Better yet, they will loan you a 100% of the money to buy and to rehab the house. Maybe you’re thinking, ‘hey my credit is terrible there’s no way they’re going to do this for me.’ Or ‘I’m just too deep in debt and I can’t do this.’ Or ‘I have no money so I can’t do this.’ But the reality is this: hard money lenders are more concerned with the structure of the deal than they are with your credit or your particular situation. Don’t get me wrong, hard money lenders are looking for you to have some character, and they’re also looking for you to be able to start something and to finish it. Because the last thing they want to do is wind up with your house. But the way they structure a deal, that’s the important thing. That’s what they are most concerned with.

The more you know about how to profit from rehabbing houses, the more you’ll want to get started. So let me give you some round numbers here. Let’s say you find a house and you find it at a fairly cheap price. Let’s say you could buy it for $30,000. You have determined through research and perhaps talking to some realtors, and doing what we call comparative analysis—that this house is worth $100,000 when it’s finished. The hard money lender is going to want to be in the house at around $65,000 with the purchase price and with all the rehab. Put yourself in his position. Here’s the way this works. Since he is limiting this investment to be 65%, he feels like you do—that the house is worth $100,000 when it’s finished—he’s in it pretty good. He’s in a situation where if he needed to get out of it he could. So therefore he is not so concerned with your credit.

Profit from Rehabbing Houses

Now let’s go through this again and you’re going to be amazed to discover just how powerful this method is for you. You’ve found a house that’s worth $100,000 finished. You can buy it now for $30,000—and you know that. Now the question becomes, can you do all the rehab for an additional $30-35,000 so you’re in it at $65,000. If you can do that and if you can put that down on paper and you can show a basic budget for the rehab and if it comes out to be within the 65% range total—purchase AND rehab—your hard money lender is probably going to be in.

And now you’re saying, well, where can I find these guys? Well, I don’t know if your local area has real estate investment clubs, most major cities have them. If your city doesn’t have one, perhaps you can drive to the next city and join that. You can bet for sure that the hard money lenders will be there. If they’re not there, their cards will be there or they’ll have a representative there. You can also find them online. My recommendation to you is that when you’re going to deal with a hard money lender, you deal with someone who is local and one who is familiar with your market. Dealing with someone out of the market sometimes means they don’t have a complete understanding of your market. So ideally, you’ll want to deal with some who is familiar with your market.

Rehabbing HousesAnd so that’s the hard money lender. The second way you might want to get started is to partner up with someone. Yes, you could find someone that will do a joint venture (JV). And maybe you’ll find someone that has the money but doesn’t have any time. Their money is not making any money. Some people say that if you give 1% at the bank you can lose all your money in the stock market. I wonder if you’ve realized by now that JV partners are interested in real estate because real estate is here to stay. It’s a sure thing. Worst case scenario you make a mistake on your budget but it’s still worth something. And they’re probably in the same situation with the same thinking that as long as we’re in it finished at a reasonable amount of money, how can we possibly go wrong? Of course the idea is way to make money. So you might want to partner up with someone. Now when you partner up with someone, obviously you’re going to have to split some profit. But the key here is to get started. Figure out a way to get started because once you get started, things start to fall together. There’s an old saying: the harder I work the luckier I get. Well the reality is, you’re out there things start to come to you. Things start to get better and better. And when you sell your first house and make $30-40,000 and put that in your pocket, you’re going to know what I’m talking about. It’s the best thing I’ve ever done. And I think it’ll be the best thing you’ve ever done. But you do need to get started. If you’re the kind of person that wants to get involved in rehabbing houses to make a tidy profit, then this will be exactly what you’re looking for.

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