5 Ways to Get Money for Home Renovations
Categories: Financing, Property Management
One of the biggest challenges in owning a home or rental property is the need to pay for repairs. Depending on the condition of your property, the cost may be minor, or if maintenance is long overdue, your costs could be in the thousands to repair and renovate the property.
In this article, we’ll give you some easy tips to get the money you need to flip your house and either keep it or resell it for a profit.
1. Drawing on Savings for Renovations
Savings is the most traditional and challenging way to fund the improvement of your property.
If you’ve been saving for years in anticipation of the big renovation, then you’ll be set; however, most of us won’t have the money saved specifically for this purpose and it may set back other goals that you have planned.
2. Home Equity Line of Credit (HELOC)
Another very popular option is the home equity line of credit or HELOC. In short, the HELOC works something like a secured credit card that allows you to borrow against the equity in your home – the difference between what it’s worth and what you still have left to pay on it.
Home equity lines are generally less expensive than other forms of borrowed capital and carry reasonable interest rates. This is low risk for lenders as their capital is protected by your equity in the event that you fail to make payments.
3. Refinance Your Way to Home Renovations
Instead of a HELOC, you can also opt for a full refinance. This will get you the best interest rate and allow you to get cashback for repairs and renovations after the closing of the refinance.
Depending on the loan program, you may need to pay closing costs; however, the savings on interest will make it more than worthwhile in the long run.
In addition to getting the cash you need, this will also help get you out of an adjustable or high-rate mortgage and lock in a low fixed-rate mortgage.
4. Private and Hard Money Lenders
If your plan is to sell the property for big profit, you may want to consider speaking to private and hard money lenders.
These loans require no credit check (in most cases) and the loan is secured against the property.
Private lenders will loan you the money for a fixed period – usually four months to a year – to quickly fix up the property and put it on the market.
At the end of the term of the loan, you’ll need to sell the property, pay back the loan in full or refinance.
Private money typically carries with it high interest rates, often as much as 16%, due to the increased risk these lenders take.
5. Real Estate Investors
There’s yet another option that isn’t so common:
You can partner with a local investor to fund your fix up and share the profits once the property is sold.
If you’re not in the position to take out a loan, but know that your property has tons of potential, there may be a local investor that will provide the funds as part of a joint venture.
The investor will pay for all the repairs and help you sell the property. At closing, you’ll split the proceeds and never pay a cent on interest.
Picking the Best Path to Home Renovations
There you go: 5 straightforward paths to getting the money you need to make your property a pearl.
Choose the option that fits with your goals and financial situation: one of these is likely to work for you.
Just because your house will be super-marketable after the renovations, doesn’t mean you have to sell it. You can keep it and enjoy the modern finishes as long as you like: it’s your flip!
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