As an investor, you should know your loan-to-value ratio. This compares your loan amount to the home’s value. If you’re fixing and flipping, you’ll have two LTVs – the original (as-is) value and the after-repaired value.
Your after-repairs value is your ‘money.’ If you fix the home up enough, your LTV should decrease, which equals more profits. For example, if you invest 20 percent in the home, and then repair it, the value should increase. Your LTV should decrease from 80 percent to say 60 or 70 percent, depending on the changes made. An LTV decrease from 80 to 60 percent means a 20 percent increase in profits – not a bad investment, right?
Obviously, that’s a fictional scenario as each value and LTV depends on the market and the changes you make to the home.
Find a lender that provides the financing you need at affordable terms. Real estate investing provides ample opportunity for great profits when you find the right home and the loan with the right terms. Determine how much money you can invest in a property and find a lender that can accommodate your needs.
High LTVs don’t mean crazy high-interest rates or difficult terms. Find a lender that specializes in real estate investments, helping investors like you make the most of the fix and flip or buy and hold market. There are many opportunities out there – and with the right knowledge in hand, you will be ready to pursue them.