Is this a deal worth doing with Hardmoney

4 Replies

I don't usually use hard money so I don't know how much meat needs to be on the bones for a deal to make sense. I found a deal for 50 grand with a very conservative ARV of 95. I sold one down the street a couple of years ago so I have a very good feel for the neighborhood. Repairs are 10 to 15 depending on whether or not you paint or reside the exterior. I know it's kind of thin but I would do it with my own money except my capital is tied up at the moment.

Are you keeping it for yourself or reselling it?

With a thin deal you really don't want to use HML. They will eat up profits fast with holding costs.

I would put together some solid numbers, comps, and a scope of work. Post it on here looking for a money partner. 

Account Closed, if you need hard money for both the purchase AND rehab costs, then I would agree with your sentiment that there probably isn't enough meat left on the bone, especially if your main market would other investors who would also be looking for a discount below ARV. How about if you offered even less?...

ARV of $95k

At 70% = 66.5k  Less $15k for a rehab is OK at $50k in my book.

Hard Money with my guys would be something like:

They'd give you $45k  (90%) less origination for closing, so you'd need about $8k to close.

Then they'd escrow $15k so you'd want some reserves to pay for stuff up to the draws, say $5k.

Your added expense of the loan is going to be 2.5% for the origination, then 1% per month in interest.  You'd have the insurance and closing expense of roughly $1500 either way.

Your deal would look like:

Purchase: $50,000

Closing/Ins: $1,500

Rehab: $15,000

Money costs (@6mos including origination): $5,100

Sales costs: $6,000

Total Expenses:  $77,600

[email protected] $95,000

Profit:  $17,400 (assuming you do the exterior and it doesn't increase the value)

You'd prob want about $15k cash to do the deal.  That worth your time and resources?  Some would leap at that, some wouldn't bother.

I personally think its pretty silly to say the cost is different if you use your own cash vs. borrowing it because that money can be making you money somewhere else, there are opportunity costs in using your own coin that you should still factor into your deal analysis.  Same with your labor.  

Anyway, you are looking at paying an extra $5k to use other people's money to do the deal, and the deal should pay you somewhere between $17,500 and $22,500 using your numbers, more if you turn it in less than 6 months, which is very possible on that light of a rehab in my market.

Seems like a winner to me, $15k rehabs are nothing, what will that take a week or two max?

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