Renovo Financial’s Rehab Loan Program

Renovo Financial’s Rehab Loan Program – Daniel Rosen discusses REO’s, Rehab Loans, Rehabbing, and Renovo’s loan program.

Adding Flare to Your Rehab Project

In our first blog post we covered five broad ways to maximize quality when rehabbing a distressed property. Now it’s time to focus on one of those points: exercising your creativity. Often times, the difference between an average rehab and an exemplary one depends on how well the rehabber can balance budget and creativity. But what does it mean to exercise your creativity? At Renovo, we call it adding “flare” to your project. Below we’ve listed three ways you can add flare to your rehab without spending too much time and money.

Coffered Ceiling

The ancient Greeks and Romans used stone coffers for structural support. Today, wooden coffers add depth and detail to your ceiling. The living room and dining room are excellent places to install square coffers against a light colored ceiling. In cooler climates (like Chicago in the winter) dark stained coffers are great at adding warmth to a room. Basic grid layouts can be installed by anyone with moderate carpentry experience, however more detailed designs can be installed relatively quickly by a professional.

See this link for an outline of the supplies and steps you’ll need to take to install a coffered ceiling: http://www.hgtv.com/home-improvement/coffered-ceiling/index.html

Chair Rail

Installing a chair rail is an inexpensive way to accent a room. The color you choose for the rail can be distinct or match other trim that has been installed throughout the house. Chair rails give you the freedom to choose from an array of two-tone color schemes for the walls. By establishing a dividing line on the wall, the chair rail allows you to paint the room two colors: one above the rail and one below. You should not let practicality restrict where you install the rail. While the chair rail has the practical use of protection against scratches, feel free to install a chair rail in rooms without individual chairs. See this link for details on how to install a chair rail: http://www.familyhandyman.com/DIY-Projects/Home-Decorating/Decorative-Trim/how-to-install-a-chair-rail/View-All

Kitchen Backsplash

The kitchen is a focal point of any home and often serves as the purchaser’s final deciding factor. Making sure your kitchen is in prestine condition is a must. One way to add flare to the kitchen is putting in a tile backsplash. Custom luxury homes might include handcrafted mosaic backsplashes. There’s no need to go that far for a rehab project, but picking out a nice looking tile design for the space between the countertops and cabinets is a nice touch. Many hardware stores carry tile caulking kits for a do-it-yourself job. Otherwise, hiring someone to install a backsplash might be a good choice to help sell your rehab project in a neighborhood where the standards are higher than average.

See this link for a step-by-step guide on backsplashes: http://www.thisoldhouse.com/toh/how-to/intro/0,,472318,00.html

For More Information about hard money lender Call us at (312) 243-3288 or Email us at info@renovofinancial.com.

Rehab Investing on a Budget

Tips to maximize quality and value under the constraint of time and budget

As a rehab investor, you must renovate on budget and in a timely fashion in order to meet the demands of your rehab loans.  The profit you stand to make on a rehab investment relies heavily on your ability to stay on time, on budget, and add the right kind of value to your projects. Without careful planning and strategy, your next rehab could turn into an expensive endeavor yielding little profit.  From our experience at Renovo, rehab investors who follow these guidelines are best suited to realize the greatest returns on investment.

1. Strategically Collect Estimates

Start by educating yourself on how to prepare a scope of work and budget. It is best to give three contractors a scope of work up-front as a guide for their bid. Be sure each contractor knows they are competing for your project. In addition, explain to them that you are an investor, not a retail customer, and there is a possibility you will continue to give them more jobs as long as they are on time and on budget. It is crucial that bidders know they are competing for your project; this way you will be quoted competitive prices.

2. Interview and Sign Contracts Up Front With Contractors

Unforeseen circumstances can disrupt your renovation.  Make sure you sign contracts with your construction team that detail the length of the project, payment schedule, and protocols for changes in work orders.  When everyone understands what is expected of them, the construction process is destined to be smoother.

3. Exercise Your Creativity

Rehabbing on a budget should not prevent you from adding style and value to your project. The ultimate question: how can I turn $1,000 of work into $10,000 of value. There are a wide variety of techniques to add “flare” to a house and maintain a tight budget. Chair rails, back splashes, and ceiling coffers are just a few examples. We’ll be posting a full piece on this topic in a couple weeks.

4. Shop Local

Start your shopping at national chains. Compile prices for fixtures, tiles, flooring, vanities, etc. and take your list out to local stores. Local stores often have higher quality products at a higher price, but once you tell them you buy in volume, and Home Depot or Lowe’s carry similar products at a cheaper price, they’ll often price match to get your business.

5. Quality

While it’s important to be budget-conscious, don’t settle for low quality items. You must take the time to add real value to your project. Remember, you’re selling a product and your buyers have choices. It’s no different than customers choosing a phone. Make them choose your house! When a new homeowner views your rehab you should leave them no reasons to say “no”.

Holiday Vacation???

Attention real estate investors. If no one has told you…..we are! Now is the best time to work hard and line up your next rehab projects. Talk to your hard money lender, line up your rehab loans, or get your private lenders ready. Even if you plan to do your deals cash, use hard money lenders to leverage and do multiple deals before spring hits. Whatever you do, let your competition stuff their belly’s with holiday treats and go on vacation. But, as a distressed real estate investor, here are three reasons why this is the best time to roll up your sleeves, and set your business up for a great spring!

Time your rehabs to hit the market in the spring!

I was just working with one of our investor rehab loan clients, who blew me away with their business plan. I always had the notion that if you wanted to do 10 deals this year, you would have to do 5 properties every 6 months. My clients plan: buy 10 properties from November through January, and have them all rehabbed and on the market between March and July. He and his partner then take off August, September, and October, and come back to buying in November again. I thought brilliant. Why? Because their entire set of rehabs go on the spring market. Now, I personally have sold many houses from October through January, so it’s not to say you can’t, but why not plan your rehab business around the best time to buy, and the best time to sell.

Your competition is filling up on turkey and going to the beach!

So often, we find deals getting swallowed up with multiple offers and of course many times bid up to a price that breaks our models. What better way to avoid that issue by making offers while your competition is on Vacation. Many real estate investors work hard so they can take long Thanksgiving, Christmas, New Years, and Holiday vacations. I say, work harder during those times, and vacation when prices are better anyhow, like August to October. Some of the best times to make offers are right before Thanksgiving and just before Christmas. Your competition is already counting down the days to break and winding down their work. We say, make multiple offers then.

Banks are clearing their yearend books!

As the year comes to a close, many of the banks who were hard pressed to negotiate may be more eager to clear their books for a fresh new year. Take advantage of the fact that finally, the banks just may have a sense of urgency to move a short sale or foreclosure quickly and at a steep discount.

Q&A with Kevin Werner, CEO of Renovo Financial

Q: What’s the benefit of borrowing money to acquire and rehab properties?

A: There are circumstances where high net worth individuals may choose not to borrow money for projects. Yet, for most investors, it is crucial to stay liquid through unforeseen opportunities and problems. Borrowing money allows for greater flexibility in taking on projects. You might find yourself in the middle of one project when another good opportunity presents itself. Financing provides individuals the option of completing multiple projects. Going over budget is another problem that rehab investors might face. Different loan structures allow for extra funding (at a price) in the event that the investor needs to spend more money on a project. If leveraging your resources does not leave potential for multiplying your resources then you should not take out a loan.

Q: What’s the Chicago rehab market like and what kind of profit should a rehabber expect to make?

A: The supply of distressed properties in Chicago is steady. This means that the opportunity to acquire and rehab properties is strong. Renovo customers have made an average of $40,000 in profit per project which translates to a multiple of 1.4x. Rehab projects typically last around 6 months and require an investment of ~20%.

Q: What should a borrower look for in the right lender?

A: Look for a lender that has funded lots of projects and can execute draws quickly. You do not want to work with a lender that is not experienced in real estate investment lending. Whether you’re an amateur or experienced rehab investor, it’s good to have side-by-side due diligence on every project. This ensures the greatest possibility of success. The ability to fund multiple projects is also important and small lenders might not be able to fund many projects at once. Predictability is another characteristic that investors should look for in lenders. You do not want to end up with a lender who alters rates and programs arbitrarily. Establishing a long term borrower-lender relationship with reliable rates and services is the ultimate goal.

Hard Money Loans and Rehab Loans: Is There a Difference?

Renovo’s VP of Business Development, Daniel Rosen, served on a panel at AREAA’s REO/short sale summit this past week. When asked about difference between hard money lending and rehab lending, Daniel provided an answer that illustrated Renovo’s unique approach to lending. This blog post is Renovo’s perspective on the fundamental difference between rehab and hard money lenders.

Hard money loans and rehab loans have become synonymous for many real estate lenders and borrowers. Faced with a pressing need for capital, borrowers often neglect to investigate the difference between hard money and rehab lenders. On the lender side, increased demand for capital has reduced the need for lenders to differentiate themselves. In turn, there are a number of accomplished real estate investors who argue that there is no fundamental difference between hard money and rehab lenders. Renovo disagrees.

The rehab of a distressed property requires regular draws and visits on behalf of the lender; something hard money institutions are not typically set up to do. Hard money lenders focus on the as-is value of a property when determining loan amount, more so than a rehab lender who is focused on after repaired value. Rehab lenders like Renovo view rehabilitation as a valueadded process which is crucial to the eventual profit of a rehab investor. Rehab lenders focus on projects where renovation significantly contributes to the eventual value of a property. A borrower’s ability to execute and operate a construction site, display previous success in rehab projects, and ultimately run their renovation are critical components that rehab lenders look for in their borrowers.

Risk is the factor all lenders try to mitigate. The major difference between rehab lenders and hard money lenders is how they mitigate this factor. Rehab lenders mitigate the risk in renovation by evaluating the project and the client’s ability to execute it. Past experience and history of successful rehabs would be good indicators of a client’s ability to execute the project. Hard money lenders mitigate risk by keeping a low loan-to-value based on the current value of the property and avoid the renovation process entirely.