Hard Money Loan to Conventional Loan Strategy

[Brad T.]

Hi Everyone,

I have been listening to the podcasts from Lifestyles Unlimited. Their main strategy for buy and hold is to purchase houses and fix them up with a hard money loan and then convert the loan into a conventional loan. They do this to roll the repair costs into the conventional loan. What are your thoughts on this? Seems to make sense if there is a decent amount of repairs needed on the house, otherwise, the closing costs would cancel out the benefit.

Thanks!

Brad

[Lynn Dee Murrow]

Hi Brad,

I am a Mentor at Lifestyles Unlimited. Jon is correct, we use this strategy to purchase distressed property that will not qualify for conventional financing. This is just one of many strategies used depending on the nature of the deal. When you do a side by side comparison of the same deal that needs rehab you will see that when you use hard money, even with the additional costs, your cash out of pocket is less and your cash-on-cash return is higher. It is a method that helps you leverage the investment funds that you have. Hope this helps!!