In what applications would one want to use a hard money lender?
Anyone have good/bad experiences with it?
I have some ideas, but wanted to see what others say. Thanks!
You would use HML when you have an incredible deal, but no money.
One Example:
You come across a property that you believe will appraise out for $1.5 million. The seller will sell it to you for $800,000. Normally you would need at least 10% down. If you don’t have 10-20% to put down then you could get a 100% loan from a HML because the deal is under 65% of the appraised value.
I find HML helpful for fast closing. The one I’m working with can supposedly close in 2 days! I never tested that, but they have done fine in 7 day closings.
My experience has been OK, they are expensive with points, but I make money still, so I suppose its only the hogs that get slaughtered.
Some people will use a HML to close fast because they are trying to 1031 a property. Then the deal falls through and they need to put the money in a property before they get taxed. So a HML steps up and closes in a week. I don’t see a lot of applications for this type of use. I think they are mostly used to rehab and get 100% financing.