Second mortgages or home equity lines of credit are often used to rehab an investment property. You will need to meet certain asset guidelines to secure a second mortgage. When you don’t meet these guidelines, a second deed trust loan is an option. When you expect the turn around on your property to be quick, or you need additional funds to prepare a property for sale, a second deed trust loan is perfect for you.
Investing Without Spending Your Cash Reserves
When you are in the business of property rehabilitation for resale purposes, your cash reserves can be more important than your credit score. Your ability to borrow money at low interest rates can increase your overall profit margin, but if you don’t meet specific cash flow requirements it can be impossible to secure a second mortgage. You don’t have to deplete your financial resources in order to rehab a property, but you need to be creative with your funding sources.
Time Spent on the Project Influences Profits
The longer it takes for you to prepare a home for resale, the more money you will spend on first and second mortgage payments. Knowing that you have monthly payments to make will help keep you motivated to get the job done on time.
Avoid Liquidating Other Assets to Rehab a Property
Some property investors will sell off a smaller property to solve cash flow issues when trying to secure a second mortgage. While this works, you may have to sell a property for less than it’s worth in order to sell quickly. A second deed trust loan is a better alternative that offers a lower financial risk than selling off a property under pressure. When you want to rehab a property and you need extra money, a second deed loan is a great choice.