Hard money lender to fund your first deal?

25 Replies

Hey Jordan...   I am curious what the typical terms would be for a hard money lender.  Thinking of using one myself.  Hope someone who has used a hard money lender or is a hard money lender replies to the post :)  

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I would not use hard money, you don't need to. Hard money is typically used if you're over the 4 or 10 conventional mortgage limit. You'll get a better interest rate with conventional loans and make a much better return overall.

It will depend on whether their is room in the deal and your personal tolerance for risk. I would talk to a few lenders and see if they would be willing to lend to you based on your experience level and cash reserves.

We didn't use hard money on our first two deals but entertained the idea. Ultimately we wanted to get some experience under our belt first, and wanted to be sure we had the cash reserves to pay off the loan in the event things didn't go as planned.

We are still experimenting with it. We've done one flip and have been close to two more deals from direct mail, but a lot of the calls we get are tire kickers. 

The key though is to send them out consistently. Our first 2-3 mailings we barely got any response. It wasn't until the 4th and 5th mailing to the same list that we started receiving a decent response. We've spent about $2K total on mailings over the past 6 months and closed one flip for $26K so it has been worth it so far!

@Jordan Licensee could you borrow from a 401k?  That is a way to get a down payment at a low interest rate and then borrow the rest conventionally. If you don't have the cash for a conventional loan you definitely don't want to do hard money - you could leverage yourself into financial hardship if the deal goes bad.

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18 with no money, no credit, no past REI experience and i'm assuming no steady income? I would save up over the years, build up some credit and research more and more before trying to get a loan with none of the above. I think the only way is for a friend or family member to loan you the money. Good luck though!

PS.. while doing that, you might go through another market correction which could benefit you greatly. Most parts of the country have come back and or come back strong. I'm having a hard time in CT right now with over bidders, cash buyers and nothing worth getting into. Seems to be my only option is to buy land and start new construction at this point. 

Matt

Was going to say exactly the same thing as Matt.

Stop listening to all these glorified posts about no money deals until you have a large amount of deals and years of experience under your belt.

Hi @Jordan Lisenbee , perhaps focus on finding a duplex, or 4 flex to house hack for your first deal? You get experience as a landlord, and it can create great cash flow. I did this with my first single family home with a buddy for a few years. Then turned it into a full time rental when I moved out. Food for thought.