Hard Money Exit Plans

Hello guys,
I am a young lady and I have been looking into the REI business for a little less than 2 year now. I recently got approved for a hard money loan (70%, 14% interest, 4 to 5 points…). I have been working with a realtor that has tons of bank owned properties but I cant figure out a quick exit stratagey. Should I try and sell them to investors by getting the bank to take a discount and marking the price up a couple of thousand or should I just put them on the market and try and sell quickly buy offering little incentives and pricing them a little below market value. I have ideas but I need help from some of you men (LOL!) that are seasoned in the business. Any advice would be helpful and all advice is welcome. Ok… I’ll be waiting fellas … :wink: :wink:

REO’s are tough to generalize.

We’re working a REO right now that only needed minor work to get it on the market. The last one had to be gutted and “rebuilt”.

So, it’s hard to say what your exit strategy “should” be from here. maybe we could comment on a specific deal.

Flipping them to another investor and making a couple thousand is good money, but if they were that easy, the rehabber would already have it.

Why didn’t you go with more conventional (cheaper) financing? do you have cash to cover holding costs? would you have the patience and work ethic to rehab it yourself if you can’t find a buyer (plan B)?

Yikes 14% and only a 70 LTV!! Gimmie a break. There are much better deals than that around.

Cripes we go to 90 LTV in our Foreclosure bail outs with equivelant and belended rates between 9-12%.

Did the loan officer have a gun on you?

Those terms are steep but you’re just getting into the game, is that the best available 2 u ? Make sure you are going in with a clear mind and a set of goals…
Are you able to do any rehabbing yourself? Do you have a r.e.i. strategy set in place yet? What do you want to do? Buy and hold, flip, etc? With the available terms you have quoted just make sure that whatever you do you don’t keep the existing note around very long. Either refinance or sell, or?
I would hate to see anyone get into r.e.i. only to get burned on their first deal and then go sour on the whole field. You are on the right track, just tread carefully.


Your points are well taken but if she refinances or sells quickely her cost of funds, considering the five points paid, increases dramaticely.

My advice would be that next time shop more thoroughly and dont bite the bait so fast.

At worst get a higher LTV loan as I previously outlined.

If anyone needs information on best rates and higher LTV hard money loans or foreclosur Bailouts, I will direct you to funding sources which are much more resonable than the one used.
Good luck…Erv

I dont really know much about rehabbing but I am more than willing to do the work… I dont have much cash to fall back on so I really need my first deal to go very well. I want to buy and flip to generate lump sums of cash and invest into cash flowing properties such as multi units and apartment complexes. If anyone knows of any lenders that would do better terms please let me know. My plan was to have about 25 to 30 thousand dollars in profit by September all from using hard money to finance deals. What do you guys think?

I have good credit though :slight_smile:

Please read the last paragraph in my posting above

Actually your terms for a hard money loan are not bad.

Things that you should look for:

  1. Rehab funds will be included with the loan. (Put into an escrow account and released for work completed.)

  2. Payments wrapped up into loan so that you do not have to make them on your own.

  3. No income/asset checks

  4. Do they truly operate off the ARV. Be careful, a lot of hard money lenders will tell you they operate off the arv, but when it comes down to plugging in figures they’ll decide they want some “skin in the game”.

  5. Make sure they loan nationwide. Many hard money lenders only loan in their local area, sometimes a surrounding state or two as well.

  6. No money for a due dillegence fee is needed upfront. The only upfront fee, if any, should be the appraisal.

I’ve researched these lenders for a long time now and can tell you that if you feel comfortable with who you are dealing with then move forward. You can always research lenders for new projects while you’re working on this one.

Erv - I see what you mean regarding points.Point ( no pun intended) taken. I have never used a hard money loan myself. Instead , I usually use a local savings and loan bank that works with investors.
REQueen - do you have a steady income? Perhaps there is better terms available to you from other sources ,eg, local banks. Your realtor should be familiar with local banks that may work with you. At least you could see what other terms are available to you before moving forward.
Hard money loans do interest me, too, and I may just compare that route with my "conventional " route next time. I have become more familiar with them, thanks to this excellent site.