Richmond, Virginia is one of the hottest real estate markets in the country right now, and there’s no shortage of reasons why: strong economy, rich history & culture, and picturesque location, to name a few.
If you’re thinking about making an investment, it’s important to know what financing options are available to you, and which ones are best tailored to fit your project’s goals.
If your real estate project in Richmond involves any new construction, broadly speaking, your best option will likely be a construction loan.
For construction loans, the payment structure and total loan value depend entirely on the projected final value of the property, meaning it’s up to the borrower to prove that the project is a sound investment for the lender.
For this reason, there tend to be more steps involved in securing construction loans. Borrowers have to put together a “blue book”, or detailed description of the project, including floor plans, timeline, and profit projections. Like other short-term loans, construction loans typically require a down payment of around 20%, a credit score of 600 or above (and no bankruptcy claims), and a qualified builder that the lender can trust.
Fix and Flip Loans
A fix and flip loan is best for those hoping to flip houses for profit in Richmond. Between their quick turnaround time and convenient terms, these loans are specifically structured for fix and flip investors.
For example, when you’re flipping a home, time is of the essence - as soon as you’ve found the property that’s right for you, you’re going to need to secure financing in order to get started on renovations. Fix and flip loans make this easy, as they can close in as little as a week, allowing you to get right to work on your project.
For this type of financing, it’s best to work through a hard money lender rather than a bank. Hard money lenders like Walnut Street Finance structure fix and flip loans specifically for people interested in flipping houses - meaning fewer restrictions, faster turnaround time, and lower barriers to entry than you’d see with a traditional lender.
If you’re in the market to acquire property in Richmond, and don’t plan on performing any construction or renovations, then acquisition loans are the perfect product for you.
Whereas construction loans and fix and flip loans are designed to help you increase the value of a property, acquisition loans are designed for investors who hope to purchase a piece of property, but currently lack the cash to do so. The advantage of acquisition loans offered by hard money lenders is that, much like fix and flip and construction loans, securing them is much easier and faster as compared to traditional lenders.
Once you’ve gotten your piece of property, the next steps are up to you. If you’re planning to eventually sell the property for profit, you could begin work with your own cash, or seek out another financial product to cover the costs of construction or renovation.
The final common financial product for Richmond real estate investors is the bridge loan. As the name implies, these are most helpful for when developers or investors need cash to cover the costs of beginning a second project while a first project is still underway.
As long as you’re aware of the risks, bridge loans can be a very versatile financial product. Their primary benefit is that they prevent investors from missing out on profitable investment opportunities, even if they lack the cash on-hand to purchase the property.
Looking for Financing for a Richmond Real Estate Investment?
If you’re planning a real estate investment in Richmond, you’re going to need a financial partner who is familiar with the area, preferably one with a successful track record of investment.
If you’re considering an investment and are ready to make a move, reach out Walnut Street Finance today - we’ll help you learn what options are available to you, and how they can help you meet your goals (and turn a healthy profit along the way).
In the meantime, if you’d like to learn more about how you can get involved in real estate investment, check out our free ebook, Building Your Real Estate Empire: Borrower Basics 101.