Hard Money Lending by WN Funding

There are many ways to make money in real estate, some more challenging than others. Rehabbing is the most well known and one of the most basic ways to make money. It's especially a great way to start in real estate if you have knowledge of how to fix-up a property. The basic idea is this: buy, fix, and sell (or refi and rent) but even amongst rehabbers there are many formulas used. It's important for you to develop a plan that works best for you but don't try to re-invent the wheel. We'd like to present you with what we think is a solid business plan. There must always be a comfortable cushion between the purchase price and the selling price of investment property. This cushion price will help you achieve a successful investment, even if you have repair cost over-runs, or hold on to the property longer than you had anticipated. Below is the formula we'd like you to use if you want to buy property with no money down using our funds.

STEP #1: Establish an after repair value (ARV) for the property. Get "area comps" and view each one. Pick out the property that has a street that is most similar to your house's street, and a structure that is closest to your house's structure, then compare the square footage, amount of bedrooms and bathrooms that are all listed on the "comps." This will help establish a real fair market value for your property.

STEP #2: Calculate 65% LTV of the After-Repair-Value. Multiply the After-repair-value by 0.65 to get 65% of the ARV.

STEP #3: Establish a comprehensive and accurate list of repairs. Come up with a good list of repairs that you plan to do to the property, and estimate the costs for each repair. This is very important. If you are knowledgeable and experienced in doing repair work, you may not need help. If you are not experienced or skilled in this, find someone who is and have them draw up a plan. Even if it costs you a little money to get them out there, this could save you thousands of dollars down the road.

STEP #4: Subtract the cost of repairs. Subtract the total repair cost from the 65% value of the ARV that you established in Step # 2.

The final number you have now come up with after "Step 4" should be the maximum price that you pay for the property! This is a conservative formula, and it usually works well. Remember, anyone can buy a property at close to fair market value, but with your costs and risks, you must do better!