TIDAL LOANS

HOW TO REFINANCE A HARD MONEY LOAN
Temp to Perm Loans

So, you found the perfect real estate investment property you want to hold as rental investment. You got a sweet deal on the property, executed the contract, called us at Tidal Loans for a hard money rehab loan. We funded the property fast, closed the loan with no money down, completed all construction draws and have the property on the market leased for above market rent! Everything is perfect, just need one more step. You need to refinance the temporary hard money loan to permanent financing. It’s a very important step for real estate investors, because the higher rate on the temporary loan will hurt the property’s cash flow. The mortgage rates on conventional loans tend be lower. Here is how Tidal Loans assist our clients refinance their hard money loan.

At our initial free consultation, we sit down with you and determine you end strategy for the property. Are you looking for a fix and flip loan or a temp to perm loan, to hold the property for the long haul and receive rental passive income? If the latter, we take a few more steps initially to qualify you to ensure that you can get a conventional loan before you buy the property. The last thing you want to do is get stuck with the temporary loan. Our loan officers walk you through that process, and even if you have bad credit, our loan officers work with you to repair it. So, don’t worry you can still get a hard money loan and refinance to a temp to perm loan if you have bad credit, our loan officer specializes in that.

Once you are qualified, the hard money loan is funded, then once the property is leased, another closing is scheduled to pay off the original hard money loan, and apply the conventional loan to the property. The title company handles all the paperwork, getting the payoff docs from the lender etc. Once the conventional loan is funded, you begin paying your mortgage payment to the new lender, and your off and running towards your next deal!


Tidal Loans
Houston Premiere Hard Money Lender

Top Real Estate Formulas Every Real Estate Investor Should Understand To Acquire Real Estate Financing.
1. Debt Service Ratio

Debt Service Coverage Ratio (DSCR) is the amount of cash flow available to meet annual interest and principal payments on debt.
=Net Operating Income/Debt Service

Example:
Noi: $15,000

Annual Debt Service$10,000

Debt Service Ratio= $15,000/$10,000=1.5

This number is not very important for residential Hard Money Lenders and Private Residential Lenders. However, it is a very important number to Commercial Real Estate Lenders and Banks. The Debt coverage ratio measures the project/company ability to maintain its current debt. That is why the higher the number the better.

In order to acquire real estate financing, most banks and hard money lenders require the project to have a 1.25 or higher debt service ratio. Simply put, that means the borrower /investor has 25% excess income to meet his obligations. A ratio below 1, would mean the borrower does not have enough income from the project to meet his debt obligations.

Why is this number important?
The debt coverage ratio will definitely impact the investors ability to get real estate funding at reasonable terms and conditions. So, when doing due diligence on your next investor commercial property, be sure to analyze the debt service ratio of the project, it will help you sleep at night!

TIDAL LOANS
HOUSTON HARD MONEY LENDER