Whats the best exit strategy for a hard money loan? I hear people talk about refi's but if you pay one loan and aquire another where's the possitive cash flow? I really don't understand. Could someone explain?
@Ronnie Neal generally, Hard Money lenders charge much higher interest rates for much shorter terms. For example, a hard money guy may give you terms of 12 months at 15%. Ouch, but if you rehab the home, get it rented for several months, then refi into a conventional 30 year fixed mortgage, your interest rate will be much lower and cash flow will increase.
@Brooks Rembert Ok so basicly Im transfering loans at a lower intrest rate? So now that Ive obtained a property thats rented the banks would give me a conventional loan with my existing bad credit?, well actually I have no credit but is this a sure thing?
definitely not a sure thing
@Brooks Rembert Thx for the info Brooks.
My exit strategy if I were to utilize convenient yet extremely expensive hard money would involve the phrase "as soon as possible". If I had no or questionable credit, I would approach a quality mortgage broker and/or bank and ask them some what-if scenarios. Even with a probable approval from them, it's not a sure thing. Sure things don't even exist with a w-2 job!
@Ronnie Neal exactly what everyone else is saying. You would want to refinance for a lower interest rate and a longer term than private money. Rates are very low these days with conventional financing. You would want to have a plan on getting approved for financing. Have you looked into qualifying for conventional financing yet? It maybe worth it to first see what you need to do to get to the point of qualifying, if the terms are not favorable with private financing.
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