Hard Money Loan OR Conventional Loan??

I read Bob Barney’s article on this topic at: http://www.reiclub.com/articles/hml-vs-conventional but still don’t completely understand. Based on his article, the cost difference between a HML and convention is minimal. How can this be true?

I am looking for my first rehab project. I will need a no-doc/low-doc loan under the name of my LLC. I have $30,000 cash on hand available for this project. I was thinking of a property with ARV of around $200k with purchase price of 75%*ARV – repair costs. I don’t have the time or resources to look for a seller with flexible terms. I’m talking about a cash purchase and rehab. What is the best way to approach this? HML or conventional?

My thought: If I can qualify for a conventional loan, isn’t it always better and cheaper than a HML because of the lower interest & points?

Thanks in advance for all your responses

If the property is distressed enough, chances it will not pass conventional underwriting guidelines

Actually, there are some conventional lenders that also do
rehab loans. Of course, if fast closing is not an issue, this may be a wise choice

depends on what your exit strategy is, that’s how i determine what kind of financing. what do you plan to do with it in the end. Long-term hml’s will kill you. short term conventionals will hold you hostage. think about what you want to do-- quick turn or accumulation. what is your time frame for rehab, exit whatever. the right type of loan is all time value of money.

I plan to do a cash purchase, rehab, and cash resale in 6 months or less.

I was thinking of using a: Conventional 1 year fixed ARM, interest only. If I can qualify, that will definitely be more cost saving than using a HML right?

Thanks for your responses.

the cheapest way would be to use credit cards or other lines of credit like a heloc on your primary residence or other property