Understanding the Value of Construction to Permanent Real Estate Investment Loans

 

Real estate investing is all about finding opportunities and capitalizing on them.

Learning to recognize these opportunities takes time and experience. You look at a run-down property and see a perfect fix and flip. You look at a foreclosed house and see an ideal single-family rental. You see a vacant lot and see consistent positive cash flow.

But you don’t always see the end of the story at the start. That’s why investors need flexible financing options that let them capitalize on opportunities and leverage their cash, all while avoiding time wasters.

One way to gain flexibility is by finding the right lender with the right loan products. And perhaps the most flexible financing option is a single loan that covers both rehab and rental holding costs.

At Lima One Capital, we listen to our customers, and they have been clamoring for a construction to permanent financing solution. We are pleased to launch two new loans: Fix2Rent and Build2Rent. These financing options serve real estate investors who want a single-close loan that covers both rehab or construction and rental.

Lima One Capital is the first specialty lender to offer this kind of single-close loan, which lenders have been clamoring for.

Why is this kind of Fix2Rent or Build2Rent loan valuable for investors? These program highlights reveal the reasons you may want to consider construction to permanent financing for your real estate portfolio.

Single Close

Closing a loan requires details, documents, and money. Even when you work with a lender like Lima One Capital that specializes in quick, efficient closing, the underwriting and closing process takes time.

A single-close construction to permanent loan or rehab to permanent loan eliminates one closing date and much of the work that comes along with it. This streamlined process reduces the time you will have to spend dealing with details, leaving you more time to keep your real estate investment process running.

Fewer Fees

Real estate closings come with closing costs. And while some lenders (such as Lima One Capital) provide pricing concessions on a project that starts with a fix and flip loan and then refinances into 30-year rental financing, you still pay some fees twice.

On the other hand, a single close fix and flip loan helps you to avoid some duplicated fees. By eliminating the need for a refinance, this kind of loan provides many investors a better real estate financing value.

Better Terms

With a single-close loan, you can arrange for an interest-only monthly payment during construction, as well as a fully amortized 30-year loan afterward. This gives you a preferable monthly payment during both the fix and hold portions of the loan,right from the start.

Flexibility

A single-close loan empowers you to seamlessly move from a fix and flip approach to a rental approach. But it should not require you to do so. Look for a loan that lets you stay flexible in case you choose to sell your property after fixing it up if the market forces indicate that is the most profitable approach.

Lima One Capital’s Fix2Rent loan allows you to exit a loan once rehab is done, instead of converting it. So if you get an amazing offer to sell the home, you can take it. The parallel is also true of our Build2Rent loan once construction is complete. This option to exit maintains your flexibility as an investor, so that you continue to build your real estate portfolio in the most strategic and profitable manner.

BRRR-friendly

The BRRR strategy, which stands for Buy-Rent-Rehab-Refinance, is a popular way that real estate investors build their portfolios. A single-close loan like Fix2Rent matches this strategy by making the refinance step incredibly easy.

Instead of creating a whole new loan, the single-close loan converts from a fix and flip construction interest-only bridge loan to a 30-year fully amortized rental loan, closing the BRRR loop and letting the investor move on to the next BRRR project. This makes it much easier to add a fourth R (Repeat) to BRRR investing.

Takeway

As you’re building a real estate portfolio, you’re going to encounter some situations where a fix and flip approach is most profitable, and others where holding a rental property makes more sense. Finding an option for a single-close fix and flip loan gives you the flexibility to take either approach, depending on your particular investment needs.

If you’d like more information about Lima One Capital’s Fix2Rent and Build2Rent single-close loans, contact us today. Our team will happily work with you to determine if it’s the right fit for your real estate investment portfolio.

 

Lima One Capital, LLC. NMLS ID # 1324403, 201 E. McBee Ave. Suite 300. Greenville, SC 29601. Lima One Capital, LLC is not currently licensed in AK, ID, ME, MT, ND, NV, SD, UT or VT. Lima One Capital, LLC is licensed or exempt from licensing in all other states. Minnesota: This is not an offer to enter into an agreement. Any such offer may only be made in accordance with the requirements of Minn. Stat. §47.206(3). Lima One Capital, LLC is licensed in Arizona as a Mortgage Broker (License No. MB-0936439) and Mortgage Banker (License No. 949706). Lima One Capital, LLC is licensed as a California Finance Lender under Department of Business Oversight (License No. 60DBO-45834). Lima One Capital, LLC is licensed in Florida as a Mortgage Lender (License No. MLD1555) and Mortgage Servicer (License No. MLD1662). Lima One Capital, LLC is licensed in Oregon as a Mortgage Lender (License No. ML-5397). Annual percentage rate may be increased after fixed-rate period expires. Loans are subject to additional underwriting criteria.