Hi everyone,
I am currently looking to get started in real estate investing, and have been thinking about using hard money lenders as my source of financing. I understand the criterias for qualification, and funding. But have resently been told that even though they will fund my purchase and rehab I will still have to come up with up front rehab costs, that will be reimbursed through my loan. I was just wondering is there anyway that I can get some of the money for the materials and rehab up front. I know the property will qualify, and I can get the funding for it. But I dont have the money to pay for the materials and labor up front. 
Thanks for any advice , in advance.
Extrodinaire
Get a credit card from a local hardware place. Home Depot, Lowes etc. The rehab loan is put into an escrow account, so you will have to do draws, just like a construction loan.
You can have a contractor work, then when they invoice, do a draw and get the money to pay them from the loan.
It isn’t like the draw money doesn’t come for weeks. It usually is released upon acceptance of a positive draw inspection. SO put the stuff on credit if you are doing it yourself…then do a draw once you have finished that work.
I am just starting out myself and ran into the same situation. It appears that you or someone you know is doing the work themselves.
Here goes:
Depending on what the Hard Money Lender would give you (usually 65% to 75% of the ARV) you could get cash at closing. Say you purchase house at 65%ARV and all the seller wants is 50%, then that means you could ask for the full 65% or 75% and receive the difference. It should all be in the paperwork when this happens. You should ask the Title Company if this is something that ever happens. I am sure they have many of stories of yes’s.
Good Luck!
Lee
Am I missing something here? Borrowing 100% but really only paying 50% to seller. This seems to imply the contract presented to the HML was not factual nor truthful.
Fanagling a way to get cash upon purchase of the project doesn’t seem to make sense, as all rehab costs are part of the initial loan. Draws typically cost $150 each, and are wired into the buyer’s account directly within a day or two.
Even if the above scenario were to work, you’d then have a much larger monthly interest payment and a bigger note to retire when the deal was sold. What’s the point?
Thanks for the correction!
What I really meant is, if he were buying a house that is selling for 50% of the ARV and he receives a HML at 65% and the paperwork is factual, a fact, true in all shapes and forms. I don’t imply illegal ways of obtaining a HML.
It does make sense when you are starting out (not having a dime in your pocket) and are able to do the work yourself. I did not have the upfront money to buy the materials or even a dime to apply towards the draw. I think you should go back to his post and re-read everything he said. You are missing alot of what he is asking and stating or maybe think outside the box; starting with no money or hardly any money. Still confuzzled and does it make sense?
The answer to his question is yes you can as long as the numbers see fit and all documentation has been filled out correctly and are true as txstars15 is stating. The Carleton Sheets program even implies how this is done.
I know you have to of been in our shoes once before txstars15, but then again maybe not.
Hope that helps everyone…
Lee