Are there any hard money lenders that don’t require you to have a certian amount of money available.
I have seen hard money lenders that do not require good credit or much money up front. The question is what is the equity position that you will have in the deal? In other words, did you buy the property for 50% of it’s actual value? The better the deal, the less they care about your money up front or your ability to pay them back.
Having said that, I think that many people go into “no money down” deals because they have no money. Unless this deal is EASY money, that can be a big mistake. If your plan is to buy and hold, how do you plan to rent the place? Do you know how to manage property? Do you know a competent property manager? If there are any problems that need to be fixed, can you do them and get this place clean, safe and in good repair?
If your plan is to fix and flip, do you have the contacts or experience to handle the improvements and sale of the property? If you had to hold the place longer than expected, could you qualify for conventional financing?
I don’t want to discourage you, but hard money lenders are professionals and you really need to know what you are doing when you are dealing with them.
Ok, thanks for your input. It is very helpful.
I was just searching this board to learn about hard money lenders but I guess I’ll jump in and ask a question in this thread.
How do the hard money lenders make their money? From what I understand, the fund a percentage of the ARV of a property. Upon sale of the property, do they take a portion of the profit or do they get their investment back with some percentage added?
I am researching my first deal which is going to be a rehab. The property is listed at $80K and I estimate $20K repairs. Running comps around the neighborhood brings me to an average of $190 ARV.
In this scenario, if I put a 20% down payment and use a hard money lender for the remaining 80% + repairs, what would be the lender’s take when I sold the property?
Hard money lender lend money. They aren’t usually looking for an equity position in the deal.
They make their money on interest and points. Typical rates here in Orlando are in the 13% - 16% range with points (percentage of money borrowed) ranging from 1.5 to 5 points, or percent.
The points are the real yield boosters for the hard money lenders (just study the finances of mortgage lending), considering that even high interest rates for very short terms are not necessarily killer dollars. Points, on the other hand, are lump sum payments that may be paid at the beginning of the loan, when the loan is paid off, or included in payments. Every hard money lender has their own criteria for what works for them. Shop around locally for different rates and terms.
Now, it used to be during the boom that you could get 100% financing on a great deal with not so great credit. However, with the market the way it is, I’m finding many hard money lender requiring investors have a stake in the deal by having a down payment, decent credit, and capital (money in the bank) to handle the payments if the property should sit on the market for a year or two.
If anyone is finding sources of money that still fund 100% of purchase price as well as fix-up costs with less than 680 credit, let me know. I’d like to get to know those folks.