Hard Money Lender for small deals

7 Replies

Hey BiggerPockets Investors,

I am currently in the process of trying to buy a SFH in North Carolina right next to a home I already own and rent. I know the area very well so my comps are pretty spot on at 105-110k. The home was offered to me off-market at 68k which I don't think is a bad deal. Im estimating 10-15k rehab on the high side since most of the work will be done by local contractors that I know personally and my dad which should bring the cost down. The problem I am having are the following:

1) I am trying to get a hard money loan on the home for 90-100% LTV, but no one seems to want to work on a deal this small no matter who I reach out to. I've tried some hard money lenders on the lender section of BiggerPockets with no success. How would you proceed to secure this deal?

2) What is the process of buying the home in cash after I am available to seek out the funds? All my properties have been bought through 30-year lenders so all I've had to do is send in paperwork and sign papers which is the easy part. Do I seek a real estate agent to proceed even if its all cash? Should I just do a lawyer to take care of the paperwork? Is there a paper I sign and send to the seller saying they are in an agreement to sell the home to me?

Any guidance will be greatly appreciated! 

Thank you and happy investing!

Just find a real estate lawyer.  In NC they can handle closings.  You do need a signed contract to proceed.  Either get a standard form from the lawyer (best option) or I was able to find the standard Realtor contract online, but it has been a few for me for a NC closing.

@Juan Carlos Camas  Congrats on finding a potential deal!

First question: you mentioned you want to keep the house to rent, but you also mentioned hard money. HML is short term only, generally 6 months, maybe a year.

You should try local banks or credit unions in your area, they can probably better offer terms for a long term rental.  

Regarding the "buying in cash" question, even if you get a hard money funding, it's still a loan and not cash. The process would be about the same as using a regular lender, in that you close and the HML funds it at that time. You just might be able to waive some contingencies which can make it faster to close.

Hope that helps!

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Congrats on getting the ball rolling. To answer your first question about trying to find a HML to work with you are correct a lot of traditional lenders & HML do not like to work with deals this size due to various reason. My suggestion would be to network with other real estate investors in your local area and see if you can find someone who would lend private money in your area, or find a local HML who only lends in your region as they may be better structured to take down deal this size.

Good Luck!

@Tom S. thank you for your reply. The reason I planned to go with a HML was so I can renovate the home and then refinance into a 30-year conventional after 6 months. My plan is to leave as little of my own money in the deal as possible and I highly doubt that going directly to a local bank or credit union will get me there since they would inspect the property and realize it needs some work.

@Juan Carlos Camas It can be tough to get a loan under $100k because of the way HMLs are structured. Most of the profits come from the points at closing. They can't justify the work involved in a loan when they are collecting less than $2k to $4k on a deal. There are lenders out there that will do it but you will have to hunt for them. Your deal may also lend itself to just a private investment from a local investor. Good luck with the deal!

Originally posted by @Ryan Blake:

@Juan Carlos Camas It can be tough to get a loan under $100k because of the way HMLs are structured. Most of the profits come from the points at closing. They can't justify the work involved in a loan when they are collecting less than $2k to $4k on a deal. There are lenders out there that will do it but you will have to hunt for them. Your deal may also lend itself to just a private investment from a local investor. Good luck with the deal!

 small balance loans you just have to pay more for them..  points don't track down exponentially on these deals..

so forget points offer a flat fee like 5k funding fee and then pay the interest..  I do these for investors on small balance deals as my normal course of bizz I rarely do a loan OVER 100k.. But as Ryan states you cant charge points its got to be a flat funding fee and as a lender/ capital provider you MUST bring in about 5k per file to stay in bizz..  Banks can do this because they have millions out and they support the community but private for profit small lenders no way they can do these and keep the rates the same as when they are doing 300k loans at 2 pionts and bringing in 6k in fee's plus junk fees.. its the exact same time effort and paper work to do a 50k loan as a 300k loan or a 1 mil loan. or a 15k loan.