So I’m looking to get my first deal done using BRRRR and I’m going with a hard money lender. Do they usually require a down payment and are there some that will fund the rehab? Just concerned about using one, don’t want to get burned...

Rehab loans are what hard money lenders do. Yes you'll usually need a down payment on the purchase price

Ahhhh...I am suggesting that you consider getting a commitment from whomever you are going to refinance the rehab with, for what % of new appraised value they'll give you and other requirements like stabilization period, etc. You will then be able to better determine your spread, what carrying costs you can handle, and back into the HML specifics.

That's tricky to do Joseph because most lenders don't know what the next 6 months will throw at them. Most big banks are banking record reserves in preparation of a wave of defaults by year end. ** Most HML right now are requiring larger down payments. You won't find a HML with 0% down...unless you find a private lender who would do it. Many in ATL are requiring 25% LTC minimum.

@Shawn Dulan We are in a bit of a similar situation and I now realize the HML may not be the critical factor, regardless of cost. Lining up the bank refinance for the exit is getting tricky, with % dropping from the 80% we all want and seasoning/stability/reserve requirements increasing. I would consider starting from that end and working backwards into your preferred deal.

If I told you the average was 85% do you think that would necessarily help you? What if you knew that came from 100% and 70%? That could be the difference between whether you can afford a property or not. I think you need to either speak directly with lenders and discuss your situation so you can find out what they could specifically offer you or check out their websites and get an idea of what might be available (though many may not be up to date with updated terms with the current situation). Let me know if you need help with that.

For new investors, Surepoint is asking for 20% down and to show liquidity of roughly 35% for the total borrowed. M&M Lending are also asking for a lot to be brought to the table, and I am sure that Flippin loans is as well. After the storm is over, they may go back to normal 10% down, but they are defiantly going to ask for a lot of skin in the game.

The three hard money players in Louisville will require a down payment. During this current time (Covid) they are really asking a lot from new investors. It would be wise to get your long term financing in place first, dealing with the hard money guys can be expensive.

@Joe Cassandra true dat, some idea is better than relying purely on historical projections. This also raises the importance of having multiple exit strategies going in. #keepSMASHING

@Odie Ayaga so I am in the process of talking to lenders now to gain a better understanding of what I need and looking for. I still may reach out though. Thank you

@Joseph M'Mwirichia so you’re saying start with the refi and work backwards from there based upon 80%LTV? I did most of my analysis based upon 70% LTV and numbers still met metrics. I felt that finding the HML would be the more difficult part. What am I missing?

Hard money lender or not?Hard money lender or not?

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Hard money lender or not?

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