Exit Strategy for Real Estate Investors

Refinancing is an important and sometimes critical exit strategy for real estate investors. While some investors’ strategy is to buy and sell, there are no guarantees in the world of real estate investing. Keep the following tips in mind for an easier refinance.

Document Your Rehab
Keep records of your rehab project financially with receipts and pictorially with pictures of the improvements made. These items may be needed to help the appraiser justify the increased value of your rehabbed property to the lender.

Appraise before you list
Even if you plan to sell your project upon completion, have the property appraised before you list. Appraisers are required by law to list on the appraisal if the property is or has been recently listed for sale. If the property is listed before your appraisal, you could dramatically limit your refinance options.

Stay Current with Payments
Your new lender may request a Verification of Mortgage (VOM) from the rehab lender. The VOM requires the lender to provide a payment history. An on-time payment history will be necessary to get your project refinanced.

Maintain Your Credit Score
The most important asset a real estate investor has is their credit score. The market has tightened refinancing requirements and investors with low credit scores are being shut out. Do not take on more than you can handle financially or logistically.

Don’t deplete reserves
Nearly every lender will require the borrower to be able to document a certain amount of financial reserves for a mortgage approval.

Stated no longer
While a few stated programs do still exist, they are becoming increasingly scarce. Many of the remaining stated programs are reserved for borrowers with higher credit scores and those who can document large financial reserves. Some lenders will stipulate that you will need to prove a two year history of self-employment. When applying for a loan with full documentation, you will need to keep your debt ration within the lender guidelines. Your debt ratio is determined by the amount you owe as a percentage of your gross income.

While many investors plan to only buy and sell, keep in mind, a sale is not complete until the closing. Never count on a sale until the purchaser’s check clears your account.

At ReCasa Financial Group, we discuss your exit strategies before you start your rehab. Also, Ohio, Indiana and Pennsylvania investors, we have in-house brokers who are available to help with refinancing the rehab loan at the end of the loan term. We want to help you be successful till the very end! Call us today at 614-221-6770 to learn more.