Possibly using a hard money loan for flip

[Christopher Haynes]

Hello everyone I am looking into possibly using hard money for a flip in Baltimore anyone had any success in using hard money in the Baltimore area?? What I'm looking at has a purchase price of 45k needs about 20k to 30k renovation And has 3 recent comps in the area with similar bathrooms bedrooms and square footage 156k on 1/20/16 165k on 9/21/15 176k on 2/16/16 (1 more bedroom 200 more square feet) Any feedback on this potential deal? Is using a hard money Loan worth it or are hard money loans more trouble than their worth. I've just heard so many bad story's about them I'm just a bit cautious Any feedback would be greatly appreciated ***Moderator note: DO NOT REPLY WITH OFFERS OF FINANCING***

[Kevin Yoo]

@Christopher Haynes

I have heard a lot of horror stories about driving a car. But I still drive a car and do it very safely.

HML is one of the tools that you MUST have in your treasure chest for real estate investing. It is wrong for @Account Closed to tell you to forget the hard money route. Charles has most likely had tremendous success and it is not wrong not to ever use hard money. But there are many many who use hard money very successfully. So, it is wrong to state that you should never use it.

The key to success is to learn when to use HML and when not to use it. But you have to be very careful because you are right, there are many true bad stories of people using HML. By the fact that you are having to ask this question, I can see that you are a novice and need to be even more cautious.

There are many different formulas used by HML but most commonly they will lend 80% of the purchase price + rehab which for you means 80% of $75K. And if your deal is worth $165K after repairs, this is a very very safe loan for HML. You may even be able to borrow 100%. But you don't get all this money up front because they want you to have skin in the game. They will come to closing with only 65 to 80% of purchase price and you have to have the rest. They will also have fund control which means you have to float the cost of the rehab until the fund is released by HML after verification of your work. Lastly, you have to pay monthly interest which is often included in the loan, but you still have to make the payments. So, make sure you have the cash to do all this.

If you do not have the cash, then look for PML (private money) because with the %ARV that you are buying this property at, this is a deal that would very much interest a PML like me. That is a topic for another posting.

Just like you would shop around to buy a new car, talk to a lot of lenders. You must get this education even if you don't use HML on this deal or ever.