Hard Money for Flipping

[Lisa Henrich]

Can anyone give me an overview of how one goes about obtaining a hard money loan to flip a property?  What do hard money lenders require, in terms of collateral?  Ultimately, I want to build a bigger buy and hold portfolio, but I'm thinking it might be worth flipping some houses to build cash.

Thanks!

Lisa

[Zach Mitchell]

Go to one of your local real estate investor club meetings and ask around. The house you are purchasing is the collateral and they each vary on what they will lend. Some only lend on the purchase price (70-80%), which means you have to come up with the remaining 20-30%, closing costs, and rehab costs, some lend on the both purchase and repairs, and some lend on the ARV, which typically covers your purchase and some repair costs.

In any scenario, you will need to have money in the deal. Typically a portion of the initial purchase plus repair costs. Terms are usually around 12 mo. at 12-14% interest and about 2-4 points up front. Ask about ALL fees involved, a lot of them include junk fees that can add up to a lot and don't go with anyone who wants a pre-payment penalty. It's a loan for a flip, you should be able to pay it off whenever you want to.