Using hard money to fund more purchases for buy and hold
On my investing I would say I am mostly a buy and hold investor, I want to have more then 25 cash flowing units by the time I am 25. As with most investors I also do a few flips to generate income for my buy and hold portfolio, I recently started thinking about how to buy faster and realized that I can utilize hard money of current free and clear cash flowing properties to purchase more properties.
Most banks want you to have 6-12 months owning the property before they will refi your cash out of the property, this means that my cash is stuck for a year. By using hard money I am able to get loans to buy more properties and then pay off the hard money once the banks will let me.
Honestly if you buy the right properties you will have plenty of cash flow to go around and the hard money will not hurt you as much as you think.
I like many investors need to be creative to grow my portfolio and I am working on my first hard money refi (I am getting a better rate as well because I took the risk out for the lender) and my unit will still be cash flowing over $400 per month.
-Always be looking and always be buying.
Comments (3)
@Jeff Rabinowitz in this scenario I took the risk out of it because I paid cash for the property and did the rehab and rented it, most hard money lenders are taking a risk that we can do what we say we are going to do in this case it is already done.
12% 1 Point and we already had title and no appraisal.
If you can't get bank financing then you did something wrong, do your research before hand and find the lenders that will lend on the property and how it performs. You do always need a plan B mine would be to pay the lender back off with cash if need be but I already know the bank that will refi they have done a few for me.
Ian Hoover, about 9 years ago
What percentage of the value were you able to borrow? How was value determined if there was no appraisal? (A lender's title policy protects the lender against clouds on the title. Banks always require this. It seems your lender did not.)
The risk to the lender is still that you can do what you say. In this case it is getting the bank refi and /or that you still have cash available when the loan is due.
Jeff Rabinowitz, about 9 years ago
@Ian Hoover, could you share some more details? How did you take the risk out for the lender? What rate is the hml charging and what fees are added (appraisal, lender's title policy, etc.) What percentage of the appraised value will they lend? How long will they lend? What happens if you can't get the bank financing at the end of the term?
Jeff Rabinowitz, about 9 years ago