Hard Money exactly how does it work??

Question

Do you not need to put any money down for these kinda loans? do they give you money for rehabbing and what type of credit do you need?

Peter Vekselman · Answer

A great thing about hard money lenders is that they have the most flexibility when it comes to interest and points.  My advice to you would be to start using one or two of them, get to know them, and then start working on point and interest rate reductions.

Wes Tuinstra · Answer

Let me answer you  this way...

Suppose you find a house that you can buy for $300,000. You intend to put another $300,000 in upgrades and rehabbing, and the appraisal comes in (for the finished product) at $2.5 million. The loan would be for $600,000 or $700,000, somewhere in that neighborhood (remember, commissions, taxes, interest, licenses and fees, etc).

So do the math. Loan for $1 million, value of $2.5 million. LTV less than 50%. A lender will not care what your credit is...but will care what your skill level doing rehabs is. If this is your first rehab they will want credit checks.

But for those who have been in the business and do 5 or 6 flips a year, Hard Money is easy to come by and does not require working capital.

Does this make sense?

Wes Tuinstra · Answer

Remember that you read it here...

Ryan Webber speaks the truth.

N/A N/A · Answer

So do you recommend a hard money loan to a first timer, with just average credit?? and really no money to put down?? I haven't located a property yet, right now just researching financing options.

N/A N/A · Answer

Thanks Wesley

That was a great explanation. I do understand when you put it in reality terms.

Ryan Webber · Answer

Depends.  Depends.  Depends.  Everything depends on the lender.  Most don't require downpayment if the Loan To Value is low enough.  Most will give you money for rehab if the LTV is low enough.  Some will check your credit, and some won't care about your credit if the LTV is low enough.