IF A HARD MONEY LEANDS 65%LTV IS IT POSSIABLE TO GET A SECOND LOAN FOR THE REMAINING 65% ?
that makes no sense
Im in cali, what are you looking to do?
I want to purchase a single family home for income. I will not live in it. I will eather fix it and sale it or rent it out. I have been told that with my credit score, a hard money lender will only lend 65% ltv. which leaves 35% . I wanted to know if it would be possiable to find a lender for the remaining 35%. That way I can use my own funds to rehab.
thank you for responding.
No I don’t think so, but there are some lenders in cali that will lend on 70% of the completed rehab value
I think what your question meant to ask is, how do you go about financing the balance of the 35%, right?
What I would do (I live in CA also) and I hope to do in a few months… is find a home that is first of all a good deal due to the amount of repairs needed, in an “ok” neighborhood, structurally sound, etc.
Then, get the 65% loan via hard-money in conjuction with a 35% loan via the Seller through a Note held against the property. Make sure it’s got no pre-pay penalty since you plan on paying it off within 6 months.
Seller financing is usually cheaper than hard-money and easier to qualify for since it’s backed by the value of the property. (But no Seller will do 100% financing, they want immediate cash, at least 55%) Some sellers may balk at the idea of being in 2nd position after the Hard Money lender, but with the slow market in SoCal… I’ve found that Seller’s are much more cooperative than they were last year during the Seller’s market. (btw… I’m also a Realtor.)
Hope that helps,
enrico is right. As long as the HML is in 1st position they usually let the seller hold a 2nd if they are willing. It’s definitely more difficult to find the lender to do 100% financing like this, but it can be done.
Another option for you might be to finance the purchase and rehab. This requires some money upfront, but the rehab is completely covered in the loan.
You will have a hard time finding any hard money lender to allow a 35% seller carry, most want some of the borrowers cash into the deal, likely 10-20% into the deal.
Here’s one other angle I forgot to mention, though it takes a little more set-up time in advance;
What I did was I transferred my 401k into a “Self-Directed Real Estate IRA” account. It is still tax-deferred retirement savings, but instead of being limited to stock investments, you can direct the money to be directed into real estate deals of your choosing and management.
So, with 65% covered by hard-money and 35% covered by the IRA Trust account (formerly 401k $)… you hopefully have enough left in your IRA to fund your repairs, escrow fees, etc. as an investment direction of funds.
Here is a link to where I transferred mine with a FAQ page about the process;
http://www.trustetc.com/real-estate-ira/real-estate-ira-faq.html
or…
http://www.TrustEtc.com
One snag may be that there are rules about when you can empty out or transfer your 401k. You’ll need to talk to your Plan Administrator at your HR department for more about that. In my case, I retired from the company and was able to make an easy transfer of the funds into the IRA.
Also, with the IRA funds, you can purchase a property for sale from pretty much anybody. BUT… you can’t direct funds into purchasing a primary residence for yourself, or a property owned by your spouse, children (direct lineage). Those are IRS rules, not Trust company policies. But the above link goes into better detail on that.
buying and renting out a SFH in Calif will almost certainly be cash negative; especially if you using HML and/or near 100% finanacing.
check you numbers on the underlying deal here.
Thank you all for your advice and input.
I use EntrustCAMA base in Pa. I also lend my money out to a hard money lender. The fees are based on number of account, not accoutn value. They are a good company.
Why are you in need of Hard Money? What IS your credit score?