Question to lenders about how to best protect the investment.

5 Replies

Hello, and thank you for taking the time to read this and for your helpful answers.

I’ll get right to the questions.

So, I hear that hard money lenders let you borrow up to 70% of what you need to buy and rehab a property most of the time. Is this true?

I also hear that you can find a private money lender to finance the rest. Is this also true?

If both of these are true, how does the private money lender protects what he/she invested, and what does it look like in the event the deal fails and both lenders are asking to get their money back?

Again, thank you for your time and for your answers.

Originally posted by @Yadriel Carrasquillo :

Hello, and thank you for taking the time to read this and for your helpful answers.

I’ll get right to the questions.

So, I hear that hard money lenders let you borrow up to 70% of what you need to buy and rehab a property most of the time. Is this true?

I also hear that you can find a private money lender to finance the rest. Is this also true?

If both of these are true, how does the private money lender protects what he/she invested, and what does it look like in the event the deal fails and both lenders are asking to get their money back?

Again, thank you for your time and for your answers.

- Yes actually Hard money lenders will sometimes let you borrow more than 70% of purchase (plus 100% of rehab if any) depending on the deal but you will indeed normally have to have some skin in the game, at least 10%.

- Yes Private Lenders are possible.

- Dont listen to the first answer, ( @Fred Shatzoff ) some HMLs will allow a second position. We for instance do. 

- A HML will always want first Lien position to protect his investment. A true Mezanine HML (second Lein position) is only remotely possible for very large purchases.

- I have only had limited experience with private lenders. These tend to be motivated owners willing to finance part of the deal to make the sale happen or close friends/relatives doing the purchaser a favor. They are usually last in line for repayment if things go pear shaped.

- There are professional private lenders who basically will partner with the purchaser for a share of the profits. I personally have yet to encounter this in conjunction with a Hard Money Loan. Perhaps others here have.