How does getting hard money work?

Question

Hello eveyone,

so I have looked a countless properties and have a list of five I like. I have two lenders, one is a hard money lender.  I don't understand completely how it works.  The lender is New American Funding and the gentleman I talked with says find a property, send him the adress and he will price it out.  How does he do that?  And is this a good lender?

Chase Maher · Answer

Elizabeth Matos I am unaware of the lender and disclaimer I am a lender funding California.

From my experience and the process with us at Lantzman Lending, the address is needed so that we can properly and accurately comp the house and come up with an ARV or After Repair Value. This helps us get an idea of funding, generally 65-70% of this ARV.

Another way HML's look at deals is by the Purchase Price. Usually lenders fund anywhere from 70-80% of the PP and then 100% of the rehab.

Like I said, I do not know anything about that Lender, but be on the look out for a couple things to insure they are credible and fair with you.

*Do not pay any upfront fees

*Do not pay excessive "Junk Fees" - There shouldn't be anything more than a doc fee, if any, some lenders charge nearly $3,000 in these junk fees

*Make sure you are not paying interest on the rehab money while it is IN fund control (If applicable)

*Make sure there is no Pre-payment penalty. This allows you to pay off the loan early with a sale or a re-fi without being penalized

These are just a few tips. I hope it works out for you and feel free to contact me if you have an questions.

Joe Gigliello · Answer

Elizabeth

If you do not have any prior rehab experience (your first deal), we can lend up to 75% of purchase, or our estimation of as-is value, whichever is less.  For experience investors, we can lend up to 90% of purchase or AIV.  Also for experienced investors, we can lend additional dollars towards the rehab after certain work is completed.

In addition to what Chase recommended, be sure your lender:

• is a true direct lender with their own funds and is not a broker
• does not sell the note after closing to another lender or fractionalizes your note to several lenders
• services their own loans

To provide you a no obligation loan quote, we only need the following information:

• Property address
• Purchase price and projected closing date
• Rehab budget and rehab plan summary
• Current square footage and bed/bath count
• After rehab square footage and bed/bath count
• Projected exit/sale price
• Property pictures if available
• A short summary of your experience

We only finance non-owner occupied for sale residential rehab properties and new residential construction.

Please give us a call or send an email if you have any more questions.