Using a Hard Money Lender to start investing

6 Replies

I'm looking at buying a multi-family as a investment property in the Boston, Mass area. My goal is to have several properties that bring in cash flow for me. I'm looking at houses that will be up for auction or foreclosure, I think good deals could be made there. In researching hard money loans I've seen any where between 10-20% down payment. I've also come across 0% down payment. Would working with a asset based lender a good way to go to start with? is it possible to get a loan 100% financed to buy a investment property? I will re-finance asap. what are my options?

@Marc A Louis-charles loan terms will greatly depend on your experience and financial strength. Hard money lenders often have minimum credit score requirements and want down payment from beginners. You may be able to find 100% but it will cost you.

@Marc A Louis-charles, yes asset based lending could be a good way to go. Usually these loans are short term and require you to get in and get out of them, once you have the property stabilized with a good tenant of at least 6 months cash flow.

Are you 100% confident your exit strategy would work with these terms? The only way I see you partnering is finding a money partner within your network. Could be friends and family, business associates etc... That capital partner will lend the money on the project, stay in 1st position and receive monthly or accrued payments until the loan is paid off.

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Originally posted by @Marc A Louis-charles:

I'm looking at buying a multi-family as a investment property in the Boston, Mass area. My goal is to have several properties that bring in cash flow for me. I'm looking at houses that will be up for auction or foreclosure, I think good deals could be made there. In researching hard money loans I've seen any where between 10-20% down payment. I've also come across 0% down payment. Would working with a asset based lender a good way to go to start with? is it possible to get a loan 100% financed to buy a investment property? I will re-finance asap. what are my options?

 Most HMLs want you to have skin in the game. It's a matter of covering risk. 

Since you ask about 100% financing, the ones that I have heard of tend to a) be very expensive like 12-15% plus 5 points, so you already have paid a bit of downpayment whether you know it or not and b) the property goes to an LLC which you can get kicked out of the moment you miss payments - no foreclosure necessary and you lose sum rehab efforts you put in.

I recommend that if you use a HML (presumably because conventional financing, which is cheaper, doesn't work for you for some reason) that you go with ones that want you to have skin in the game to share their risk.

Best wishes in your endeavors. 

Hard money loans will have an interest rate of at least 8%. Where are you going to buy that offers a return to cover that borrowing cost? Unless you see this as the cost of getting your feet wet, it's tough to make sense of borrowing at hard money rates except for short-term situations