Professional · Mesa, AZ · Member since 2009 · 20 posts · 0 votes
I am brand new investor and have been doing research on the various types of investing. After everything I have read I am leaning towards Fix and Flips. I have various contacts and can get pretty good deals from contractors. My only problem is I am stuck as to where to get financing. This is a tough market to start out in and many banks in my area won't even think about lending to an investor. I have heard about Hard Money and Private Money but do not know much about either. Is there a difference between the two? Is one easier to get than the other? Any advice on financing or just getting started in general would be greatly appreciated.
It is important to start looking for financing before making any offers. Being pre-approved can help you obtain a lower purchase price, allow for a quicker closing, and save a lot of time.
Hard money typically is an investor or company that has money that they are willing to lend to investors to purchase real estate. Typically hard money lenders prefer 6 - 12 month terms and have high interest rates, this is because they do not usually have any type of credit check. Whether they lend or not will usually be determined on the property. Often they will ask to see some sort of appraisal and home inspection. Once you get a hard money lender on board they are able to close quickly. I’ve work a hard money lender that has closed in as little as 24 hours. (This is not typical, usually hard money lenders require 7-10 minimum for due diligence reasons.)
Private money typically comes from private lenders. Typically these private lenders require more documentation and have more requirements for the borrower, however they are more forgiving than conventional lenders. Depending on the private lender requirements vary, however do aspect to provide a credit report and there to be a minimum down payment amount. Interest rates for private lenders vary, however it’s typically 1-2 points higher than going rate.
The best way to find these types of lenders is by telling everyone you know what you are looking for. Eventually you will tell someone that knows these types of lenders/investors. You can also post ads on the free websites like Craigslist and backpage, let people know you are looking for money and they will find you.
Hope this helps some! Look forward to networking with you more!
It is important to start looking for financing before making any offers. Being pre-approved can help you obtain a lower purchase price, allow for a quicker closing, and save a lot of time.
Hard money typically is an investor or company that has money that they are willing to lend to investors to purchase real estate. Typically hard money lenders prefer 6 - 12 month terms and have high interest rates, this is because they do not usually have any type of credit check. Whether they lend or not will usually be determined on the property. Often they will ask to see some sort of appraisal and home inspection. Once you get a hard money lender on board they are able to close quickly. I’ve work a hard money lender that has closed in as little as 24 hours. (This is not typical, usually hard money lenders require 7-10 minimum for due diligence reasons.)
Private money typically comes from private lenders. Typically these private lenders require more documentation and have more requirements for the borrower, however they are more forgiving than conventional lenders. Depending on the private lender requirements vary, however do aspect to provide a credit report and there to be a minimum down payment amount. Interest rates for private lenders vary, however it’s typically 1-2 points higher than going rate.
The best way to find these types of lenders is by telling everyone you know what you are looking for. Eventually you will tell someone that knows these types of lenders/investors. You can also post ads on the free websites like Craigslist and backpage, let people know you are looking for money and they will find you.
Hope this helps some! Look forward to networking with you more!
Hard money you are going to pay a lot of points and interest but it's a short term loan. You can pay anywhere from 5-10 points(a point is 1% of the loan amount)and anywhere from 12-18% interest for up to 6 months.
Private money is different. You can get away from paying any points and if you find the right person anywhere from 8-10% interest or lower.
Your best bet is either a private investor or even better a money partner that is willing to get onto the deal Find a person that is willing to front the money while you do all the work.
Have you joined your local REIA and talked to investors there who are CURRENTLY doing fix and flips? and going along with NC Mark, do you know your market - what is selling at what price, how many DOM's etc...
You might be able to find partners or HML's there also. Just be sure to do your research before you buy something. Know your exit price and rehab costs.
Are you sure you want to try to rehab it yourself and sell it? Why not just wholesale the houses and let someone else take the risk and hassle?
But to fund it yourself, I've had the most luck with private lenders and bank lines of credit. Since I got set up with those, there's no going back to hard money loans.
You obviously have seen that fix and flips in Arizona are a popular trend. I started with little capital about four years ago and was using a lot of hard money. The market has surely shifted but deals are still out there to be had. There is a hard money lender in our same suite in Mesa if you need some contact info. Best of luck!
Jarrett,
First off, I would suggest flipping contracts until you have enough to buy your own deal with your own cash. If you just can't wait, it is the availability of the cash that is important, not the cost. as long as you can get in and out quick, rate should not matter much. Good luck!! :mrgreen: