Hard Money Lender options for SFR buy and hold

8 Replies

Hello! I currently have two rentals, and I’m under contract with two more. I’m looking in Florida, SC, and Texas specifically. I’m trying to get educated on hard money long term holds, I’d love to connect with someone to learn and build a relationship with! Thank you in advance! 
-Jon

@Jon Silva

Hey Jon, I am a Realtor and investor in Tampa Florida. I sent you a personal message as well...But, I have been a part of over 50 Hard Money loan transactions. You really can't use, or really recommend to use Hard Money on a long term hold. The terms are typically 1 year. You would use it to purchase and renovate then refi out ASAP. The cost of using Hard Money is considerably higher than a conventional loan. You pay interest only payment for the duration of the loan. Most require that you keep the loan a minimum of 90 days but usually don't have any prepayment penalties after their specific time frame. You pay points right off the bat, along with closing costs. Here is an example: they will loan up to 70% to ARV. ARV is $100,000. So they will lend you $70,000 for your deal. So, your purchase price and renovations have to be less than 70% of the ARV or $70,000. Then they will fund 80% of the purchase price. So, if the purchase price of the house is $50,000 you will have to bring the $10,000 down payment plus their fee, let's say 10 points of the loan value, so an additional $7,000 plus closing costs to the table. Then you pay interest only payments at 10% so $700 a month just to carry the loan. This can eat away at your profits. This is what I have seen personally. Once you become a more seasoned investor, they will up your ARV percentage. You also, have to show tax returns, pay stubs, credit reports and have a deal that fits their criteria to even get the loan.

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Originally posted by @Mya Toohey :

@Jon Silva

Hey Jon, I am a Realtor and investor in Tampa Florida. I sent you a personal message as well...But, I have been a part of over 50 Hard Money loan transactions. You really can't use, or really recommend to use Hard Money on a long term hold. The terms are typically 1 year. You would use it to purchase and renovate then refi out ASAP. The cost of using Hard Money is considerably higher than a conventional loan. You pay interest only payment for the duration of the loan. Most require that you keep the loan a minimum of 90 days but usually don't have any prepayment penalties after their specific time frame. You pay points right off the bat, along with closing costs. Here is an example: they will loan up to 70% to ARV. ARV is $100,000. So they will lend you $70,000 for your deal. So, your purchase price and renovations have to be less than 70% of the ARV or $70,000. Then they will fund 80% of the purchase price. So, if the purchase price of the house is $50,000 you will have to bring the $10,000 down payment plus their fee, let's say 10 points of the loan value, so an additional $7,000 plus closing costs to the table. Then you pay interest only payments at 10% so $700 a month just to carry the loan. This can eat away at your profits. This is what I have seen personally. Once you become a more seasoned investor, they will up your ARV percentage. You also, have to show tax returns, pay stubs, credit reports and have a deal that fits their criteria to even get the loan.

 Are you saying 10 point loan fee?

PLUS 10%  interest?

If so IMO that is insane   The norm is 2 - 3 points in Orlando/MIAMI 

Thank you all!! The main reason I ask is, when I get to the maximum amount of loans under my name, I’m pre planning what it will take to keep my growth and factoring in cashflow. 

@Khaled Morad @Michael Plante

The last loan that my investor processed was at 5 points.  He was a new investor and a very tight deal.  I used 10 because it was easier but still got the point across that there are added fees to get the loan that can eat away at your bottom line.  I just wanted anyone reading this to be prepared.  I would rather them get a better deal and be excited than have a false hope of a deal to realize it all comes crashing down because of the fees and interest payments.   

Originally posted by @Mya Toohey :

@Khaled Morad @Michael Plante

The last loan that my investor processed was at 5 points.  He was a new investor and a very tight deal.  I used 10 because it was easier but still got the point across that there are added fees to get the loan that can eat away at your bottom line.  I just wanted anyone reading this to be prepared.  I would rather them get a better deal and be excited than have a false hope of a deal to realize it all comes crashing down because of the fees and interest payments.   

 I would recommend shopping around 


5 points is too high