Hard Money lender rate?

10 Replies

If you don’t mind sharing your opinion, what would a fair/reasonable % rate after a few years of successful deals with your HML? Thank you LS

Depends on the market and property type. I personally wouldn't be surprised if an HML stuck to their standard rate regardless of history. There's still a lot of risk involved for them. I'll say 10%.

When you say years of successful deals, how many deals is that?  If you have plenty of experience, you should be able to get 8% to do flips.

8% from HML? Not really.

An overall 10-11 seems relatively normal. 8/9 + 2.

Big players are in the mid 7s but it’s like a bank loan.

Originally posted by @David Weintraub :

8% from HML? Not really.

An overall 10-11 seems relatively normal. 8/9 + 2.

Big players are in the mid 7s but it’s like a bank loan.

Being both a borrower and a lender, I can tell you that it's possible.  And I'm not a "big player" either.

Also, usually when someone gets big and does a lot of volume, things tend to move faster, not slower (i.e. bank loans). Their relationship with their HMLs should allow them to close within a week and with less paperwork and headaches than a normal HML.

@Nghi Le I don't disagree with you, but if someone is asking about what is/isn't reasonable when it comes to HML, my assumption is their experience is imited, and therefore won't be getting bottom rates.

Btw, WEST COAST rates are lower than the rest of the country.  

Originally posted by @David Weintraub :

@Nghi Le I don't disagree with you, but if someone is asking about what is/isn't reasonable when it comes to HML, my assumption is their experience is imited, and therefore won't be getting bottom rates.

Btw, WEST COAST rates are lower than the rest of the country.  

Actually, it's only California where the rates are lower than rest of the country... typical HML terms in Washington state are 12% and 2-4 pts, even for experienced investors, even though the average property in Seattle sells for $700k. The lenders that I'm using nowadays are from the east coast and mid-west.

OP was asking what are reasonable rates after having done several deals with the same HML. I know a lot of local investors in my area still paying for 12% and 3pts after doing 10 deals with the same HML, which never made sense to me. Relationships and repeat business should be rewarded.

Yeah, you're right.  

After a "few years" of deals, which I assume is more than 6, you're justified in being as low as 8.5%, if it's offered, but it also depends on the deal itself.  

Everything is deal based, no?  I mean, if you're going to have the money out for 2-3 months, that's not as good to the lender as say 6-8, right?  And the points follow in the opposite direction, I'd think.  

I just spoke to someone who has been with a big Jersey lender, and has done 8 deals in 3 years.  He was still paying 12%, and they wouldn't come off the #.  I guess they didn't need his business. 

@David Weintraub

Sometimes the lenders can't help it.  It depends on where they get their money from.  I know a few lenders in my area get their money from private investors that they're paying 12% (so they essentially just make money on the points).  It's hard for them to go back to those investors to ask them to accept a lower return, especially when the market has been booming.  If they can't reduce their cost of capital, they won't be able to lower their rates.

Originally posted by @Nghi Le :

@David Weintraub

Sometimes the lenders can't help it.  It depends on where they get their money from.  I know a few lenders in my area get their money from private investors that they're paying 12% (so they essentially just make money on the points).  It's hard for them to go back to those investors to ask them to accept a lower return, especially when the market has been booming.  If they can't reduce their cost of capital, they won't be able to lower their rates.

 Oh, believe me, I live in that world.......

Market, RELATIONSHIPS, property... no one size fits all number

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