BiggerPockets

Ive been having some trouble finding a hard money loan to do a rehab. I understand about protecting their money and not sure if they are getting better and better or not but i thought it was alot easier to get one of these starting out?

Everything i run into is 10-20% down of the purchase price, or your own homes equity, or even equity split with 12% intrest but your collateral is your own home.

Anyone know of any companies out there that have a different approach? Like 3-4 point at the end of the loan and "x" intrest? I want to build relationships with people who have money and i will turn them into hard money lenders for me to save me a little money but i need to do a flip or 2 to show im credible. If they see my profits and i let them have 10% everytime i sell a home in 90 days thats going to be a good return for them.

Any advice in this area? I dont have a home with equity, not do i have cash sitting around for the down.

People who invest money are usually interested in two things: Risk and Return. You have said that you can offer a good return. So your next challenge will be to convince the lender / investor that you can do it in a manner that will minimize their risk.

Since you are starting out, the primary risk from an investor's perspective is the risk that you will not know what you are doing and lose the money. If you can address this by either showing some experience of success, or by bringing in a mentor, it might help.

yea im having some trouble with that too. I will let you know. I found one but still wants collateral on my home (not enough) and 50% profit.

ok will do. are you talking LTV or ARV?

i was just thinking even arv 70% after repairs seems tough. thats like a home worth 153k with 20k in work means you have to get it at 87k for someone to give you a loan. then your done at 107K. with closings costs and cost of money that still leaves me 26k though. my thing is agents are starting to become a pain here. buyers agents dont know what they heck they are doing or dont understand the investor mindset then the listing agents just dont even bother with your offer when you try to put it in with them they just say its not gonna work.

guess all i can do is keep trying. just want to have some sort of financing before i just start putting in offers.

Now you're making me nervous. If you can buy your example for $87K, put $20K into repairs, and sell it for $153K your potential profit is most likely something like $15K. You would need about $15K to cover the closing costs, points, interest payments and other holding costs. If it goes really well and you stay on budget and sell quickly at the $153K price, your profit might be higher.

If you budge off this criteria, and buy this house for, say 95K, putting your purchase plus rehab at 75% of ARV, then your most likely profit drops to only $7K. If you do everything right, maybe you make $15K. If anything goes wrong, you're at break even or even a loss. Be cautious of jumping on a deal that's overpriced.

Originally posted by Jon Holdman

Now you're making me nervous. If you can buy your example for $87K, put $20K into repairs, and sell it for $153K your potential profit is most likely something like $15K. You would need about $15K to cover the closing costs, points, interest payments and other holding costs. If it goes really well and you stay on budget and sell quickly at the $153K price, your profit might be higher.

If you budge off this criteria, and buy this house for, say 95K, putting your purchase plus rehab at 75% of ARV, then your most likely profit drops to only $7K. If you do everything right, maybe you make $15K. If anything goes wrong, you're at break even or even a loss. Be cautious of jumping on a deal that's overpriced.

Well Said Jon. There are many things to consider when looking at a potential deal. Its not always black and white.

Feel free to share any of what I wrote back to you. For everyone else, the example Dwight sent was a house with an ARV of $173K and $18K in repairs. I came up with $103K as the max price (70% rule) and ended up with a profit of $13K after all the costs.

There's $14K of money costs in there, though. If I was using my own money, this would generate more like $27K in "profit", though some of that's my return on the capital. If I was doing the work myself with my own crew and just paying them $10 an hour or some such, my rehab costs would be less. If I was doing it seriously, I'd get my license and avoid the listing agent fees, which would be another $5K for the example. So, I'm up to something like $41K in profit. If I was willing to make only $18K, which would still be a 15% return on my money, I could pay another $23K for that property. That would put purchase ($126K) plus rehab (discounted to $9K) at 78% of ARV.

OTOH, if I had $135K to invest like this, I'd just as soon make hard money loans and collect 15% or so with no work and much less risk.

ok so i added the hard money part of it to the loan calculator on the spread sheet. If i can perfect this better and better i think it could be something good for anyone rehabbing to use to calculate things very fast before an offer using a HML. I sent it to jon so he can see what else should be added.

hmm. wont let me use it but i can see it. so im not sure what you type in and what calculates its self. well i sent another version to hom so maybe he can help with that. it has no rent stuff like his through.

oh i know! i know i can get people interested in investing with me. But i also understand the mindset of their money so i feel like if i have a 2 deals to show for and my profit i can show experience and they will definatley want a return on their money with me. I just know they want to feel comfy with me and their money.