Hard money for beginners In's and Out's

9 Replies

Hello BP community!

Me and my fianceé are newbies from the greater Boston area and we are interested in small multi-family properties (tris and quads). We want to pursue a BRRR strategy in either the Norfolk county, Worcester county and Merrimack valley.

Since we are new to REI and recent grads at the same time, we do not have enough cash nor able to secure private money for the time being (we want to have a track record before seeking out partnerships). Furthermore, we renewed our 12-month lease just 2 months ago, so an FHA is not in our interest until next year.

Our financial situation enables us to seek for either sellers financing or hard money. Our max purchase price is around $300k and we are looking at 100% LTV and 100% rehab of hard money. We are educated but we lack the practical experience, our heads go blank once we try to map out the process and due diligence with hard money lenders and contractors.

We are in dire need of practical guidance. Any suggestions will be greatly appreciated! 

Thanks in advance!

Hi Manuel. When it comes to Hard Money Lender I would just schedule a call and start filling in the blanks. Figure out what they offer what are the rates and requirements.  See which one makes more sense to you and your situation. The best way to do that is to get on the phone with a whole bunch of them. Then start looking at reviews of the ones that you felt vibed the best with your current situation. I hope this helps. 

Originally posted by @Manuel Fontan :

Hello BP community!

Me and my fianceé are newbies from the greater Boston area and we are interested in small multi-family properties (tris and quads). We want to pursue a BRRR strategy in either the Norfolk county, Worcester county and Merrimack valley.

Since we are new to REI and recent grads at the same time, we do not have enough cash nor able to secure private money for the time being (we want to have a track record before seeking out partnerships). Furthermore, we renewed our 12-month lease just 2 months ago, so an FHA is not in our interest until next year.

Our financial situation enables us to seek for either sellers financing or hard money. Our max purchase price is around $300k and we are looking at 100% LTV and 100% rehab of hard money. We are educated but we lack the practical experience, our heads go blank once we try to map out the process and due diligence with hard money lenders and contractors.

We are in dire need of practical guidance. Any suggestions will be greatly appreciated! 

Thanks in advance!

probably not what you want to hear but no experience and 100% LTV and 100% rehab funding simply is not in the market place.. the only people that will offer that I will say with 99% accuracy are scammers telling you what you want to hear to beat you out of small amount of due diligence money or application fees and will never fund.. this simply is not attainable nor SHOULD it be..

Manuel, I am a hard money lender in MA, based in Raynham. Although I agree that 100% LTV and 100% of the rehab do not exist, especially to the novice, you should message me to discuss general terms / deals. We are lending money out at pretty agressvie rates / terms...Let me know if you want to discuss further... Happy Investing!

Manuel, my podcast on hard money lending is an early one, go back to podcast 9, it will help you with information to start with.  

Second, hard money lenders don't lend 100% even to experienced borrowers as a rule, and certainly not to beginners.  (Having said that, I have occasionally lent 100% but the circumstances are unusual and rare, and never with a beginner.  There are plenty of lenders who won't lend to beginners at all).  

Third, if you get in a position to put significant cash as a downpayment, you should always look at local lenders who know your market, and can move quickly.  They frequently do their own evaluation of value and you don't wait for formal appraisals.  They also have resources that are useful to you.

Hi Manuel,

I am a hard money lender and investor in the Maryland market for 20 years, and just making my way back to Bigger Pockets. It has really grown and is a fantastic tool to connect with real estate investors nationwide and in your local market. As you were advised above, we do not typically lend to even A Credit borrowers 100% financing. Typically, you will see loan options around 65-75% LTV and borrowers will need to bring 10% of the purchase price plus closing costs to settlement, or some variation of that sort. We want all borrowers to have "skin in the game".

You could look for a friend or family member to put up some cash and make them a partner or offer them a fixed % return on their money for set period of time.  There are sometimes creative ways where you can get a seller to hold a small second mortgage too.  Seller financing sounds great, though it is a needed in a haystack to find.  Every deal is different and there are lots of opportunities if you find a great property.

With that said, I have done 100% loans to repeat borrowers that find a great deal such as where my loan would cover 100% of his purchase and renovation, and still only be around 50% LTV! That though, was years ago. Realistically, that is an unlikely event today, given the market. You probably are best to find someone you know who trusts you to help you get started.

Best Wishes,

Michael Krupp

MD Private Lender

@Manuel Fontan - Think about it in reverse.  If you were wealthy or owned a business that loaned money, how would you feel if someone came to you with no experience and no money and wanted to buy a multifamily property with 100% of your money and then rehab it with 100% of your money?  Would you be a little concerned about getting 100% of your money back PLUS interest?

Like others have said, there are other options.  Many of us were in the same boat as you in the beginning.  I personally had $0 (technically less).  I joined a real estate investment group, went to real estate networking meetings, read real estate books, took a weekend workshop on wholesaling, wholesaled some properties, once I had enough down money I borrowed money from a private lender (my real estate lawyer) and flipped a property, then another, then I had enough to buy a single family rental, partnered with my brother, bought another...now I have 82 rental units (single family, multifamily, office and commercial). That whole process was 8 years. (2 years wholesaling, 2 years flipping, 4 years buy and hold).

So it is possible.  And there's no "One Way".  You just have to figure out your path (seller financing, partnering with a family member, master lease, private interest only money, lease purchase etc).

If you get to the point where you have down money feel free to message me.  Because once you have down money, doesn't mean you'll be able to get a bank loan (ask me how I know - that's a whole other problem many investors deal with).  Luckily I now have several lenders that base the loans off of me but the property instead.  That's been a game changer in the past 2 years.