I've been searching for a while now and I've been finding widely varying rates from lenders. I want to get some flips funded but the rates, costs and fees are all over the place.
What is typical? So I know which ones are way too far in left field and I should avoid.
@DJ Porter in simplest terms, private lenders (PML) are your friends, family, and personal acquaintances who will loan to you at 12% or lower. You don't want to go straight to 12% when you talk to them, most will be happy with much less than that.
Hard money lenders (HML) will usually charge 12% or more. As you've seen, the numbers can be all over the place. None of this is written in stone. You can expect to pay the highest rates from HMLs on your first deals until you establish a track record. Not everybody will be successful when they first try this and you have to understand that you are asking them to take a pretty significant risk to invest with you without any experience.
The best HMLs to deal with are the ones who will only fund your deal with a high probability of success. So don't be upset if you get denied on a thin profit margin deal. They are always taking the risk that they get the property back, but you definitely want to only use HMLs when an adequate profit margin exists.
@Robert Leonard is pretty much spot on. My HML is at 2 points and 12% (special rate because lender knows my mentor; normally the terms wouldn't be as favorable for a newbie), Private Lender is a friend and barely charging above the prime rate.
Note about HML's - pay attention to your HML's opinion of the deal if he/she is experienced. If the lender won't loan, it is a good indication that the deal isn't as sweet as you think it is.
Rates will vary by location, who your know, your track record, and the LTV ratio. If you are seeking near 100% financing it may be difficult to obtain money, especially if you don't have experience you can document. If you are putting up 35% or more of your own cash, that should help defray lenders fears. I have done some private lending and always worked to get the lowest LTV possible. Recently I turned down a request for money. The borrower wants to buy a church and use that as collateral. If it was a SFR I would have looked at the deal. Knowing nothing about lending on churches, I said no right up front. The more "skin in the game" you have the easier it will be to find funds.
Lenders are inclined to lower their rates when you shift the risk of the deal to yourself (the borrower) and/or have done a few loans with them proving you are experienced (a portfolio and references of your deals aren't necessarily a bad thing either). Getting a lender's best rate can be done a number of ways, but the big way is to decrease the LTV through a low purchase price and bringing some of your own money to the table (skin in the game). At the end of the day though, every lender is going to be different as they have preferred minimums they either want or need to get.
Lenny made a good point. If you're willing to bring collateral/skin in the game to the closing table in the form of cash or other property, you'll convince lenders you're a less risky borrower. Many lenders need to charge 4 points and 15% because they have one risk model - either you make it across the finish line or they foreclose and they make their money on the front end and your half-completed project.
I have seen some clients of mine actually use several credit cards that have promotions (for example 0% for 12 months). Although I hate using credit cards for anything, this is one possibility of funding yourself at no interest. Just bear in mind if you let the promotion period expire you can expect an interest rate well above that of a typical hard money lender.
I really appreciate all of the comments.
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