Fort Belvoir, VA · Member since 2017 · 1 post · 0 votes
I am anxious to start flipping and selling homes. I am curious has anyone used a hard money lender to do this. Also me not having flipped before, would anyone oppose using this method with me being so novice in real estate investing?
If a HML gives you a term sheet you have a deal. Ask them how much money they have active in properties. This will give you an idea if the size of the business. Most have millions active in rehabs at any one time. Most require skin in the game. The lowest I've seen is $20k from the investor. You can get the $20k from an equity partner, private money or another HML if you don't have it.
If the ARV is $300k and the purchase price is $150k with $75k of rehab/holding costs you can expect financing costs on a 6 month flip to be $30k. If you sell with an agent at 6% you put out $20k to make $40k in 6 months. HML got a 20% return on their money and you got 100% return. Too bad you can't live on $20k in six months so you probably have keep working or do three rehabs at a time.
It boils down to the numbers. HML may or may not be the right action to take. Just read a thread on BP by a flipper whose flip has dragged out for some time and he has no buyers. HML can be VERY expensive. If there is enough profit, your number are right, good demand for the property, etc using a HML can help facilitate the deal. Keep in mind most HML will want to see a track record, etc or have you put more skin in the game.
If a HML gives you a term sheet you have a deal. Ask them how much money they have active in properties. This will give you an idea if the size of the business. Most have millions active in rehabs at any one time. Most require skin in the game. The lowest I've seen is $20k from the investor. You can get the $20k from an equity partner, private money or another HML if you don't have it.
If the ARV is $300k and the purchase price is $150k with $75k of rehab/holding costs you can expect financing costs on a 6 month flip to be $30k. If you sell with an agent at 6% you put out $20k to make $40k in 6 months. HML got a 20% return on their money and you got 100% return. Too bad you can't live on $20k in six months so you probably have keep working or do three rehabs at a time.
Hard money lenders vary a lot. Different minimum ARVs, some have credit score requirements while others don't, points or no points. If you are interested in hard money lenders, I would definitely ask for their lending guidelines prior to taking action since every place is different.
If a HML gives you a term sheet you have a deal. Ask them how much money they have active in properties. This will give you an idea if the size of the business. Most have millions active in rehabs at any one time.
I really like this way of vetting how much money they have. If anyone doesn't know, some (smaller) lenders occasionally run out of money and it could delay your closing while they try to source new funds and/or sell their notes to liquidate.