Hard money vs Conventional loan
Hi all!
A friend suggested I network at Bigger Pockets to get my questions answered. I'm a newbie investor with 5 single family home rentals. All were conventional loans with 20-25% down. I just recently discover Hard money loans but not sure if it is right for me. My goal is to use the least amount of my personal funding to close a home. The 20-25% down plus closing cost and repairs has really eating away my funds.
I have 2 deals in the works and hoping someone can help me determine if hard money then refi is the way to go. If possible, please instruct step by step since I have never used Hard money. then rate to term. I am hoping to learn enough so when I approach a Hard money lender, I won't sound too much like a newbie. Thank you all :)
About me:
Credit score: 760
Reserves: $100,000 in stocks, $200,000 in 401k
I have 5 rental homes with average of $400 positive cash flow for each but only 1 of them has been in my tax returns for 2 years. The other 4 rentals I optained this past year (2013)
The term of hard money is as followed:
Lender fee starting at 4%
interest rate 13-15%
term 6-12 month
they will loan up to 65% arv/ltv
The deals:
1. Zillow Zestimate is $105,900. I'm contracted with $97,500 with seller paying 2% closing. It needs about $7000 in repairs. My estimated closing cost with conventional loan is $29,000 and repair cost $7000 totaling $36,000 out of pocket
2. Zillow Zestimate is $117,626. HUD home. I'm contracted with $89,900 with seller paying 2% closing. It needs about $3000 in repairs. My estimated closing cost with conventional loan is $25,000 and repair cost $3000 totaling $28,000 out of pocket.
My goal is to use least amount out of my pocket for closing. If hard money is to be used, I will do a refi into conventional loan. These are buy and hold properties.
Thank you ALL for time spent