Real Estate Investing

5 Replies

Hi, I'm a newbie in San Diego, CA. Quick question for all uguys with experience. I have 80k to invest, and I want to start investing in real estate. I have been a part time agent and able to find good deals, is it worth using hard money in the San Diego area for a flip and just use my cash for the rehab?

As long as the numbers work, You need to make sure to add the cost of hard money plus 20% just in case. almost always the rehab will cost more than anticipated.

@Gus Guzman welcome to the BP community. This site is full of great blog posts surrounding real estate.

@Gus Guzman

 the answer to your question lies in the property you're trying to buy, and how you're trying to buy it.  However, I will say that hard money is best suited for short-term, well defined scenarios.  Not only will you want to have an exit strategy, the lender will want to know what it is ... you don't want to be paying them forever, and they want to know when their money is coming home to roost.

Welcome @Gus Guzman

 - It really depends on your goals in Real Estate Investing and the deal itself. Sure, using hard money and your cash to rehab a home may be a good idea. But only if you have a clearly defined and executable exit strategy. To be honest, your question really boils down to, do you want to start rehabbing in San Diego? If so, then yes, hard money is a solid way to go. 

That being said, hard money is typically handled in the following way here in SoCal (and everywhere else in general):

-Hard money lender will provide 70-80% of purchase price and 100% of rehab cost. So in reality your cash will be used for the 20-30% of the purchase that is not covered by the lender (aka gap funding). 

One of the most important parts of using hard money is making sure you are bringing an attractive offer for the lender and not just yourself. Using your own cash to fund the gap (hence the phrase "Gap Funding") will show you have some "skin in the game" and make lenders more comfortable when deciding to work with you. 

I hope this info helps! 

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