Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Account Closed:
Hi all-
Is it possible to close on a property with a hard money loan, then turn around and sell it on the MLS?
Would lenders lend if I had this exit strategy in mind?
Do they charge early payment penalties?
Thanks,
Ben
Possible? Yes, it's possible on a 1 off situation I suppose.
Is it a viable business strategy? No, it's not. This is a dog. Take it behind the barn & shoot it. Far better strategies out there then this one. Think about it. The property is exposed to the entire market & nobody but you buys it. How are you then able to resell it to the same people who already had the opportunity to buy it while at the same time covering your Hard Money Loan costs & putting a profit in your pocket? If they wanted it they would have already bought it.
Specialist · Hendersonville, NC · Member since 2018 · 159 posts · 23 votes
7y
@Chase McArthur - I guess you could say that. My financing on a deal broke down and I need a hard money loan quickly so that I can earn something from the deal. Per the contract, I can not assign.
Lender · Arlington, TX · Member since 2018 · 465 posts · 184 votes
7y
Originally posted by @Account Closed:
Hi all-
Is it possible to close on a property with a hard money loan, then turn around and sell it on the MLS?
Would lenders lend if I had this exit strategy in mind?
Do they charge early payment penalties?
Thanks,
Ben
In theory a HML won't mind you selling property right away. Some hml have prepay penalty though. Many have none.
However most hard money lenders want to see a substational oppertunity to add value. So some sort of rehab plan/rehab funds are attached to the loan with the aim to meet a certain after repair value. So a hml may not give you a loan for just the purchase or if they do they may want a scope of work and proof you could do the work.
If you are buying close to market price with little oppertunity to add value a hml might not like it at all. If it makes sense to rehab the property could you turn this into a flip?
There are some hml loans that are made for just a purchase, but may not be as common and often are super short term.
If property is turnkey you could buy it with a hml rental property loan. But there is a chance that will have prepay penalty.
Lender · Denver, CO · Member since 2017 · 348 posts · 143 votes
7y
The deal can be done that way and there should be no issues with a HML for a quick sale and no prepayment penalty. However the issue I potentially see is if you list on the MLS and get a typical buyer with conventional, FHA or VA financing the bank will typically have a seasoning period for title and the appraiser will want to know what was doe to the property to justify the price increase. So if you buy for 200k and sell for 300k a month later with no work done I see it being denied by the bank due to the price increase with no justification.
Is doing a double close using transaction funding not an option?
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Account Closed:
Hi all-
Is it possible to close on a property with a hard money loan, then turn around and sell it on the MLS?
Would lenders lend if I had this exit strategy in mind?
Do they charge early payment penalties?
Thanks,
Ben
Possible? Yes, it's possible on a 1 off situation I suppose.
Is it a viable business strategy? No, it's not. This is a dog. Take it behind the barn & shoot it. Far better strategies out there then this one. Think about it. The property is exposed to the entire market & nobody but you buys it. How are you then able to resell it to the same people who already had the opportunity to buy it while at the same time covering your Hard Money Loan costs & putting a profit in your pocket? If they wanted it they would have already bought it.
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Account Closed:
@James Wise
Hi James,
I found this deal off market. It was through a direct mail campaign.
It has over $100,000 in forced equity.
If you think you can make $100k you should be pitching this to any lender / investor you can & not worrying too much about the fees. I should note that I am skeptical that the spread really is that high but that's a topic for another discussion I guess. Also as a another side note talking strategy here I would get the finances lined up before spending money on a mailing campaign. Otherwise you're here spending a bunch of time & money to find a big payday & you may have finally found one but might not be able to take it down. That's a cart before the horse situation that you should aim to avoid.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
You should be able to find a hard money lender in your area that does not have a pre-payment penalty. We have executed a strategy very similar to this here in our market in Connecticut. In almost all cases though they were non-MLS deals we purchased like you mentioned you are doing.