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Appraised Versus Current Value Advantage…s –construction loan

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I’m back with hard money lender, house flipping expert, and real estate investor, Beau Eckstein, where he talks about the difference between appraised value versus current value loans.

The key difference between a current value loan and an appraised value loan is that you most likely won’t be able to do a big construction project if you work with a lender whose underwriting criteria only focuses on the current, or “as is” value of a property.

The reason is that you will have to come up with the entire amount needed to fund the construction or rehab of the property.

When you work with a hard money lender like Beau and his company, who look at the future, or future appraised value of the home AFTER the construction or rehab has taken place, you will generally need to come up with less out-of-pocket capital because they actually lend up to 65, and sometimes 70, percent of the future appraised value of the property.

This is a monumental difference between private money lenders and conventional lenders like banks.

Most construction projects nowadays are either self-funded by the real estate investor himself or funded by hard money lenders.

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