I was just recently approached with the proposition of beginning a career in REI and have spent the last week reading literally everything I can get my hands on, which has naturally led to a number of questions. I’m confident I have the strategic/logical mind and the people skills to make this work, but am just lacking the knowledge. ???
One big question I have is this:
If you can acquire a Hard Money Loan for more then what you will carry on the house (Property is retailed at 100,000 and loan is acquired for 80,000 - sales price negotiated at 70,000), it will put $10,000 in your pocket today. But why would you want to do this? (Or does my lack of knowlege have this entire scenario thrown off?). Especially if I have a Lease-Option agreement lined-up with a buyer for 115,000.
The way I see it, I can take the 10K now and pay the points on it over the life of the loan or until the property is purchased or only use what I need and take it on the back end with no interest.
If the house is not purchased for a few years, then wouldn’t be better to keep the interest money?
Can someone please explain why it is more beneficial to walk with that money at closing?
I’m really looking forward to getting into this and learning as much as I can. My goal is to close out a house within the next two months and turn it for a profit by mid-year.
Hard money is not cheap and cheap money is not hard!!!
So if you did get the Hard money for 80k @13% interest your payment is going to be $884.96 per month figured on a 30 year fixed rate… The chances of getting a 30 years fixed rate on a Hard money loan are about the same as the owner telling you here is the property free of all liens just take it for free!!!
For instance if I were to loan you money on this deal here is how I structure it. 13% and 4 points so basically 13% and $3,200 dollars with a 6 month balloon payment. So total cost of doing business $88,509.76
Thank you for your reply, Robb. I got your message from your website’s board and will give you a call this evening!
I get the rates and the cost of doing business - so why is it still worth it to take the extra $$ at closing if you’re paying those kind of rates, or wouldn’t you in this situation. Do you only take the money at closing if it’s on a mortgage through a bank on a property you plan to sell quickly?
I only really took money at closing when I was BROKE BROKE and first started. Now I leave the money in it unless I am going to resell it soon and need to show I bought it higher to sell it easier…Lets say you were going to buy a house for 100k and noticed the person bought it for 60k three months ago the bank looks at that and it is harder to obtain financing for the other buyer where as if I show I bought it for 100k and am selling it for 100k it makes the process easier Notice I said easier not easy!!