Hard Money Financing

3 Replies

I have a question about Hard Money lending to all the rehabbers. How often, if at all, is it to maintain 100% financing after recieving the loan of 65% or the 70% ARV?

Do you sometimes run over the loan amount and have to use your own money?

I only ask because I hear you can get 100% financing all the time and wanted to know what your experiences are with this type on loan.

Thanks

Don't know where you're hearing "all the time" that you can get 100% financing, but its the exception, not the rule. If purchase plus rehab is 70% of ARV, and the HML will lend you 70% of ARV you will need to come up with about 15% of ARV to cover the up front costs, closing costs, points, payments, and holding costs.

Typically we are into a deal for under 7K at 70% ARV.

We usually successfully refinance at 75% LTV with no cash out of pocket. About 15-25% of the time we may have more cash to come up with because the appraisal didn't come in right or there was a cost overrun.

You have to be prepared for this possibility. 

100% financing is very possible and we have achieved it a number of times. 65% ARV allows you to cover closing costs inside of the hard-money loan. Some hard money lenders want you to have at least 2K to 3K into the deal, regardless (if you're a newbie).

Strong credit and some reserves helps tremendously with negotiation for the hard money loan. 

Barry 

Thanks guys, I appreciate it

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.