Hard Money lenders.

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Hard Money lenders.

Mike Mutabazi
Member since 2024 · 6 posts · 8 votes

Hello BiggerPockerts family. 

I'm new to the BRRRR method, what are the requirements needed by a hard money lenders to fund a project. I'm looking to invest in Ohio state.

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Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes
2y

Mike, each lender has their different overlays, but if you're looking to get a hard money and or Bridge loan to begin the BRRRR strategy, here's a list of the most common documents lenders may ask for:

- experience / track record

- personal financial statement

- scope of work / budget

- LLC entity docs

- maybe bank statements (lender dependent)


everyone is different and each loan is a snowflake. If you want more specific answers I recommend talking to a commercial / investor focused broker.

[email protected]860-538-3672
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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes
    2y

    Mike, each lender has their different overlays, but if you're looking to get a hard money and or Bridge loan to begin the BRRRR strategy, here's a list of the most common documents lenders may ask for:

    - experience / track record

    - personal financial statement

    - scope of work / budget

    - LLC entity docs

    - maybe bank statements (lender dependent)


    everyone is different and each loan is a snowflake. If you want more specific answers I recommend talking to a commercial / investor focused broker.

    [email protected]860-538-3672
    ProAlpha Capital55 Reviews
    WebsiteView Page
    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    2y
    Quote from @Mike Mutabazi:

    Hello BiggerPockerts family. 

    I'm new to the BRRRR method, what are the requirements needed by a hard money lenders to fund a project. I'm looking to invest in Ohio state.


    I can send you some hard money lender referrals in Columbus, Ohio.
    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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    1Reply
  • John Otradovec
    Lender · Springfield, MO · Member since 2024 · 46 posts · 20 votes
    2y

    Every lender can be different but there are options that allow as little as 10% down and 100% of rehab financed. We look at everything from experience, credit, the project, and much more. Just speak with a HML and they can tell you all you need to know. I work with new investors every single day so it is easy to get started. Good Luck!

    1Reply
  • Alfath AhmedBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Mike Mutabazi:

    Hello BiggerPockerts family. 

    I'm new to the BRRRR method, what are the requirements needed by a hard money lenders to fund a project. I'm looking to invest in Ohio state.


     I have a couple of very good hard-money lenders that work with my out-of-state investors that I can connect you with. They have the best rates here. 

    [email protected]614-802-5698
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    1Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 533 votes
    2y

    Hard money / fix and flip lenders vary on their underwriting guidelines but generally they are looking for:

    1. Your Credit Score: 680+ or 700+ will get you better terms depending on the lender. 660 is the minimum for many lenders. Pricing generally is impacted by every 20 point increment of your middle mortgage FICO mortgage score so a 740-760 score will get a better rate than a 680-700 score.

    2. Type of Market: Is it a declining market, is is suburban or is it rural? If an appraiser marks it rural, the lender may not do it or it will be a lower LTV.

    3. Experience: Do you have any? Some care less about this but generally will impact how much they will lend to you. Some lenders will do up to 90% of purchase price and 100% of rehab up to 70-755% of ARV.

    4. Do you have an LLC set up? Most lenders require this.

    5. Most lenders will want a minimum of $100K for the property acquisition and rehab. Many lenders will charge additional rate increase if loan is under $150K. Lenders will generally not lend more for rehab than for the property itself.

    Most lenders will generally lend on 1-4 units and condos. These are generally 12-24 month interest only loans that borrowers will generally pay back by selling or flipping to long term financing like DSCR loans.

    More on DSCR loans:

    DSCR loans won't use your income to underwrite the loan.

    DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

    Here's a bit more in detail about how rates are calculated for DSCR loans:

    1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

    2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

    3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

    4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

    I've included an example below to help illustrate this.

    So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

    See example below:

    DSCR < 1

    Principal + Interest = $1,700

    Taxes = $350, Insurance = $100, Association Dues = $50

    Total PITIA = $2200

    Rent = $2000

    DSCR = Rent/PITIA = 2000/2200 = 0.91

    Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

    DSCR >1

    Principal + Interest = $1,500

    Taxes = $250, Insurance = $100, Association Dues = $25

    Total PITIA = $1875 Rent = $2300

    DSCR = Rent/PITIA = 2300/1875 = 1.23

    DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

    [email protected]818-770-0340
    Bright Skyline517 Reviews
    WebsiteView Page
    0Reply
  • Mike Mutabazi
    OP
    Member since 2024 · 6 posts · 8 votes
    2y
    Quote from @Remington Lyman:
    Quote from @Mike Mutabazi:

    Hello BiggerPockerts family. 

    I'm new to the BRRRR method, what are the requirements needed by a hard money lenders to fund a project. I'm looking to invest in Ohio state.


    I can send you some hard money lender referrals in Columbus, Ohio.

    Please do, I’m looking for some lenders 

    1Reply
  • Mark WilliamsPro Member
    Real Estate Broker · Huntington Beach, CA · Member since 2010 · 64 posts · 35 votes
    2y
    Quote from @Stacy Raskin:

    Hard money / fix and flip lenders vary on their underwriting guidelines but generally they are looking for:

    1. Your Credit Score: 680+ or 700+ will get you better terms depending on the lender. 660 is the minimum for many lenders. Pricing generally is impacted by every 20 point increment of your middle mortgage FICO mortgage score so a 740-760 score will get a better rate than a 680-700 score.

    2. Type of Market: Is it a declining market, is is suburban or is it rural? If an appraiser marks it rural, the lender may not do it or it will be a lower LTV.

    3. Experience: Do you have any? Some care less about this but generally will impact how much they will lend to you. Some lenders will do up to 90% of purchase price and 100% of rehab up to 70-755% of ARV.

    4. Do you have an LLC set up? Most lenders require this.

    5. Most lenders will want a minimum of $100K for the property acquisition and rehab. Many lenders will charge additional rate increase if loan is under $150K. Lenders will generally not lend more for rehab than for the property itself.

    Most lenders will generally lend on 1-4 units and condos. These are generally 12-24 month interest only loans that borrowers will generally pay back by selling or flipping to long term financing like DSCR loans.

    More on DSCR loans:

    DSCR loans won't use your income to underwrite the loan.

    DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

    Here's a bit more in detail about how rates are calculated for DSCR loans:

    1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

    2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

    3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

    4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

    I've included an example below to help illustrate this.

    So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

    See example below:

    DSCR < 1

    Principal + Interest = $1,700

    Taxes = $350, Insurance = $100, Association Dues = $50

    Total PITIA = $2200

    Rent = $2000

    DSCR = Rent/PITIA = 2000/2200 = 0.91

    Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

    DSCR >1

    Principal + Interest = $1,500

    Taxes = $250, Insurance = $100, Association Dues = $25

    Total PITIA = $1875 Rent = $2300

    DSCR = Rent/PITIA = 2300/1875 = 1.23

    DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.


     I appreciate your attention to detail. Great answer! 

    [email protected]714-745-6164
    0Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 533 votes
    2y
    Quote from @Mark Williams:
    Quote from @Stacy Raskin:

    Hard money / fix and flip lenders vary on their underwriting guidelines but generally they are looking for:

    1. Your Credit Score: 680+ or 700+ will get you better terms depending on the lender. 660 is the minimum for many lenders. Pricing generally is impacted by every 20 point increment of your middle mortgage FICO mortgage score so a 740-760 score will get a better rate than a 680-700 score.

    2. Type of Market: Is it a declining market, is is suburban or is it rural? If an appraiser marks it rural, the lender may not do it or it will be a lower LTV.

    3. Experience: Do you have any? Some care less about this but generally will impact how much they will lend to you. Some lenders will do up to 90% of purchase price and 100% of rehab up to 70-755% of ARV.

    4. Do you have an LLC set up? Most lenders require this.

    5. Most lenders will want a minimum of $100K for the property acquisition and rehab. Many lenders will charge additional rate increase if loan is under $150K. Lenders will generally not lend more for rehab than for the property itself.

    Most lenders will generally lend on 1-4 units and condos. These are generally 12-24 month interest only loans that borrowers will generally pay back by selling or flipping to long term financing like DSCR loans.

    More on DSCR loans:

    DSCR loans won't use your income to underwrite the loan.

    DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

    Here's a bit more in detail about how rates are calculated for DSCR loans:

    1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

    2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

    3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

    4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

    I've included an example below to help illustrate this.

    So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

    See example below:

    DSCR < 1

    Principal + Interest = $1,700

    Taxes = $350, Insurance = $100, Association Dues = $50

    Total PITIA = $2200

    Rent = $2000

    DSCR = Rent/PITIA = 2000/2200 = 0.91

    Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

    DSCR >1

    Principal + Interest = $1,500

    Taxes = $250, Insurance = $100, Association Dues = $25

    Total PITIA = $1875 Rent = $2300

    DSCR = Rent/PITIA = 2300/1875 = 1.23

    DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.


     I appreciate your attention to detail. Great answer! 


     Glad you found it helpful! 

    [email protected]818-770-0340
    Bright Skyline517 Reviews
    WebsiteView Page
    0Reply
  • Ammabelle Canoy
    Member since 2024 · 33 posts · 3 votes
    2y

    Generally most lenders need a 660 or maybe a 680 FICO score and enough reserves to cover the downpayment, closing and some reserves

    0Reply
  • Nate Marshall
    Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 740 votes
    2y

    Most lenders have hard and fast guidelines and qualifications. Based on experience for the most part. Some use credit to either qualify or to tier you (meaning the rate and points you are charged could be less with a 700+ credit score). 

    I know a few lenders who will do 5% down with a 600 in 4 states. One will do 100% funding if you can show them the HUD's for 10 flips.

    You can help yourself by understanding how to build a credibility package that shows experience. etc. 

    But again, most have hard and fast qualifications that are very inflexible. 

    0Reply
  • Judith Aguilar
    Member since 2023 · 21 posts · 5 votes
    2y

    @Mike Mutabazi

    Hi being a hard money lender myself typically your fico score and experience will play a big role. Given that you are new, you may need to out down 25% and receive 100% of the rehab.

    0Reply
  • Nate Marshall
    Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 740 votes
    2y
    Quote from @John Otradovec:

    Every lender can be different but there are options that allow as little as 10% down and 100% of rehab financed. We look at everything from experience, credit, the project, and much more. Just speak with a HML and they can tell you all you need to know. I work with new investors every single day so it is easy to get started. Good Luck!


     What John said.

    Yes you can get 10% down, If someone wants 20-25% laugh and move on.

    0Reply
  • Harrison Chow
    Real Estate Agent · Columbus, OH · Member since 2019 · 292 posts · 364 votes
    2y
    Quote from @Mike Mutabazi:

    Hello BiggerPockerts family. 

    I'm new to the BRRRR method, what are the requirements needed by a hard money lenders to fund a project. I'm looking to invest in Ohio state.

    Hey Mike! Welcome to the BRRRR method! When it comes to hard money lenders for projects in Ohio, requirements can vary. Typically, they'll look at factors like your credit score, experience in real estate, and the specifics of your project, such as the property's ARV (After Repair Value) and your planned renovations.

    1Reply
  • Ryan Davies
    Investor · Salt Lake City, UT · Member since 2019 · 339 posts · 126 votes
    2y

    Most work like this: 

    • • Rates: 9% to 13% (Most Deals are 11-12%)
    • Terms: up to 36 Months (Most Deals are 6-12 months)
    • Fees: 2-4 points(%) of loan amount paid at closing (Most Deals are 3 points(%))
    • Minimum Loan Amount: $50,000 (For loans less than $250,000 $2,500 minimum fee)
    • Max Loan: 65%-70% of After Repair Value(ARV)
    • 100% Rehab Financing Available (Require 20% of purchase price down payment or cross-collateral)
    • Closing Timeframe: 48 Hours - 3 Weeks (Most Deals are 2 Weeks)
    • NO PRIMARY RESIDENCES, NON-OWNER OCCUPIED ONLY, BUSINESS AND COMMERCIAL USE ONLY.
    1Reply
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