I am new to investing and I am wondering what the pros and cons are of hard money loans vs. conventional. We have two rentals that we used conventional finanicng with, but it seems there must be a quicker and more efficient way of financing rehabs and rentals. I will doing my first rehab real soon and wondering how to finance it. Any tips would be appreciated.
Frank,
I send you this link. I hope it can help you to understand hard money
concept. I never used it but I heard from others it would be the last source for financing.
http://www.bankrate.com/brm/news/mtg/20000831.asp
Nari
There is a place for hard-money loans. They are for short term (usually 6-months or less) and they get expensive if you don’t pay them off. Typically you see 3 pts origination and 1%/month interest only until paid in full. The APR will end up being 12-18% which is high but if you look at that vs. splitting your profit 50/50 with a financial partner in a deal, the hard-money loan may be a better choice.
The other good thing is that you don’t tie up money you need for fix-up on a rehab.