Starting journey and have posted about this topic before. Will be going the route of using a hard money loan to finance first flip. Wanting to know some pros and cons of going this route and experiences. What is worse case scenario if house sits on market to long and what all can i intend on being out of pocket. The way i understood was the only money that i would be out would be at closing and utilities once property is under contrat.. is this true? just wanting to know all that i can before taking my leap and it turning into and flop..
@Elias Meek Pros and Con's of Hard Money, there are several of both. Pros: they allow you to buy a property when you don't have your own money or cannot borrow money from a friend to do so. They are Asset based, not credit based ie..Hard Money so typically you don't have to have perfect credit as they aren't looking into your financial situation as much as a convention lender would. They are good for a short term flip, less than 3 months or so, they can give you a proof of funds for your offers which will make your offers stronger and they can typically fund quickly, most within 2 weeks or so.
Cons: Most require some "skin in the game" and you won't get 100% loan for the property and the rehab, they will want you to have some of your own money in the project. This makes them feel better if you have something to lose if the project doesn't work. Interest rates are high, 10-14% or higher depending on experience. The loan terms are usually 6-9 months and some allow a one time extension of 3 months. You usually pay an interest only not payment monthly which is 10% of the loan amount, you are also responsible for the typical carrying costs, insurance and all utilities. Most work on a draw system for the rehab part of the loan and will inspect the work and require receipts from your contractors before they release the funds to pay them. If something happens and the project drags on....that interest payment can get might expensive to keep paying every month.
I hope some of that helps, let me know if you have any other questions, I have good and bad experiences myself lol.
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