HML/Private lender questions

2 Replies

Hi all, My wife and I are relatively new to the investment side of real estate and are planning on doing a couple of buy/flips for the rest of the year in our area. We are weighing options between private lenders and hard money. My basic question here is: what are HML looking for? What do I need to get approved? Do I give them my business plan? Do I need to be under contract or not? This side of it is pretty new to me, and I’d appreciate any and all info available. How about private lenders? I would imagine they definitely want a solid game plan to make sure they know how their money is being put to use. Or do all they care about is their return? Thanks for the help!!!

Speaking from 2nd hand knowledge

- A they look for experience - how many such deals you have had

-B you need good credit and 25% down of purchase to be approved. Some will do 100% of Reno costs with 60-75% of ARV

- C it doesn't hurt if you have other sources of income/job/assets

-D they will look for pro forma numbers - purchase price, ARV, project Reno costs, possibly detailed and/or certified by GC

Hi Daniel--

When I analyze a deal, I rank the potential to lend/financing terms in the following order:

1. The deal itself: Location, purchase price to repair ratio, loan to ARV and estimated net profit after sale. If it's not a deal that I could personally get excited about, I'll probably pass.

2. Credit:  While a high 600 (or higher) credit score is preferable, we can work with lower scores (even under 600) if the deal makes sense.

3. Experience:  Yes, having a number of verifiable flips is the best way to get the lowest rate and highest LTARV, I work with an great number of "first timers" who routinely have 90% of their projects financed based on sound projects and good credit.

4. Assets: While last in importance, great numbers on the previous three will be irrelevant if you don't have at least some assets of your own to invest in your project.  For my Clients, the conversation begins at $15,000 which must cover down-payment, closing and reserves.

Hope this helps and best of luck moving forward!