Private "Hard Money" Lending - Associated Costs

3 Replies

Hi investors!

I have a question about hard money lending - actually probably a few. 

Just as background, I have no experience in investing in real estate.  I was in the lending industry for about 4 years, so I'm pretty well versed in traditional lending.  However, I never dealt with hard money, and only vaguely knew of its existence.  I am now selling houses as a real estate agent as my main source of income. 

When borrowing from a hard money lender, what are the associated costs?  I understand I will pay about 4 pts, give or take, and maybe an admin fee of some sort, which may vary.  Are these costs rolled into the loan?  Also, the interest cost monthly - rolled into the loan and due upon satisfaction of the debt or is this, generally, an "out of pocket" expense that needs to be added onto whatever down payment they are asking for?  

@Jordan Chiaruttini  

welcome to the site.

In a typical scenario your looking at points up front, some admin fees, & interest only payments during the loan.

Thanks James.  So that is in addition to any "skin in the game" that they want?  The lender I spoke with said they wanted at least $20k involved out of each borrower, "skin in the game".   This is probably a better question for the specific lender, I understand, but what is typical?  

Jordan, there is not really a "typical".  Each lender has his/her/their own criteria, and it depends sometimes on the business model, and sometimes on the deal.  Frequently, you'll get better terms from a lender who likes and understands the geographic area you are buying in.  Sometimes not.  Experience matters too, both with what you are doing, and history with that lender.  So call around, get a feel for what each one likes, and choose one that's a good match for where you are investing and the resources you have.  

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