lender investor contractor

Lender, Investor or Contractor?

Are you a Lender, Investor or Contractor?

The titles tend to become blurred in the home renovation industry. However, knowing what lane you really are in is vital to your success.

Lenders – Provide funding to purchase properties and pay for renovations.

Investors – Borrow money from lenders to purchase and renovate properties.

Contractors – Are hired by the investors to renovate their properties.

trafic jam

Contractors who desire to buy and renovate properties on their own become Investors. They need to borrow funds from Lenders.  Then, they must hire the various tradesman to perform the renovations. The contractor sometimes borrows money from an investor, who in turn, borrows money from a Lender.  So, you can see how quickly the lines become blurred.  It can become difficult to stay in your own lane.

When Contractors borrow funds from Investors, they pay higher interest and points. This is because the Investor must still pay for the money they borrowed from their Lender; which in turn is loaned to the contractor.  The Investor becomes a Lender and the Contractor becomes an Investor.

The problem can be compared to baseball.  You may be the best baseball player in the world, but you can not be the pitcher and catcher in the same inning.

When an investor or contractor stray out of their lane, they take time away from their primary business.  If you are chasing two rabbits at the same time you will not catch either.

girl holding rabbit

This scenario is equally bad for the Lender.  To enable an Investor to loan money to a contractor, the Lender must lower its interest and points to the investor, or the Investor must inflate the interest and points to the contractor. The end result may be the contractor making little or no money and self-destructs. Everyone loses.  

Property Redemption Services has designed guidelines to keep everyone in their own lane.

Money tug of war