HML vs Cash

Newbie question.

I have a chance to get a pre-forclusure prorerty if I can close within 10 days. ARV is around 230K. House needs 15K repairs. I am going to offer 160K.

My plan is to keep this property as a rental.

My questions are…

  1. Do hard money lenders take care of all the steps required to close deals…or are they just loaning money?

  2. If I have the cash to buy the property - should I still consider a HML so that I don’t lock up my money?

  3. If I pay cash - how easy is it to later refi so I can pull out some funds.

Is it common to use HML then later refi with a traditional lender? Again, I only have 10 days…traditional financing wont work that fast from what I am being told.

Thanks in advance,

Greetings Ed,

The first thing to keep in mind is, (as a rule of thumb) most hard money lenders only loan around 65% of ARV. So, in your case, that would equate to right around $150k on the property you described. Which means you would still need to bring some of your own money to the deal.

Hard money lenders are just loaning you money. They’re not going to take care of everything to close the deal for you. Nor would you want them to.

I think only you can answer your #2 question. How much of your own money do you want tied up in the deal? But something else to keep in mind is, hard money is not cheap. Both points and interest can be extremely expensive.

Yes, it’s very common to REFI out of a hard money loan. And, providing your credit and financial situation are in order, you shouldn’t have a problem getting a REFI whether you use hard money or do it with your own cash.

Hope this helps a little.