Asset finance strategies for property upgrades in South Florida
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Sustainable Upgrades and high-end renovations offer tremendous potential for increasing property values in South Florida. But funding these projects requires another set of tools.
It’s time to build your structured financing strategy. This guide covers in-house financing, PACE loans, hard costs vs. soft costs, asset-backed funding, and term loans.
Financing for windows and doors
Suppose you’re a real estate investor in South Florida who wants to add a new set of windows and doors to increase a property’s value. Instead of going through a bank, you can speed up the process by getting in-house financing directly from contractors. In-house financing, also known as contractor financing, is provided through vetted third-party lenders.
While researching, you find Reece Windows & Doors, a nearby contractor that offers month-to-month financing. But you also want to learn more about the company’s commitment to customer satisfaction.
While performing your due diligence, you come across an article from South Florida Business & Wealth Magazine celebrating the company’s 50th anniversary, where VP Chris Garner is quoted as saying, “The longevity of our company has boiled down to how well we take care of our customers.” He goes on to mention the company’s lifetime warranties and 6- to 8-week installation timelines.
PACE financing
While researching Reece’s financing options, you also learn about South Florida’s Property Assessed Clean Energy Program. The program is open to both residential and commercial property owners who want to make structures more resilient and energy-efficient.
If your project qualifies, PACE will cover all hard and soft costs. Hard costs refer to the sustainable building materials themselves, like impact-resistant windows, while soft costs refer to administrative costs, such as:
- Architectural fees
- Engineering reports
- Permitting
- Zoning
The PACE program is important to consider, as most traditional lenders primarily cover the hard costs of building materials, leaving property owners to pay out of pocket for soft expenses.
Term loans vs. asset-based loans
You could also build a structured financing strategy using multiple options.
Look into a Home Equity Line of Credit (HELOC), a revolving credit line that allows you to access money as you need it, instead of receiving one lump sum. This asset-based financing option can prevent you from going over budget. You may find it easier to pay it back over time, compared to a larger loan.
There are also government-backed renovation mortgages that bundle repairs and upgrades into a single loan. Cash-out refinancing is another type of asset-backed loan that effectively replaces your current mortgage with a larger one; you receive the difference in cash, which you can use to pay for property upgrades.
If you want quicker loans with more flexible eligibility, you can add personal loans to your structured financing plan. These are unsecured term loans and don’t require home equity. However, you can use home equity to get a fixed-term lump sum, also known as a closed-end home equity loan.
Weigh your financing options
Consider all of the financing options available to you, from in-house financing and PACE program loans to asset-backed financing to term loans. Create a structured solution to finance and pay back your loans.
Add this property upgrade financing guide to your real estate investing toolkit. Follow us for more investor news!