when do you approach hard money?

10 Replies

do you approach before you offer on the deal like a pre-qual letter or do you approach after you have the contract in hand?  (buy and hold).

Also I note many only offer money for flips - can you flip to yourself on a traditional loan?  

Looking at a house I wouldn't mind living in once it's fixed up.

thanks!

You should get pre-approved from the hard money lender before making offers.  These are financed offers, and just like any other financed offer, you need to include the pre-approval from the lender with the offer.

You can use hard money to acquire a property to hold.  You will fix it up and then refinance.  Be very aware of the timelines with both the hard money lender and your refi lender.  You don't want to be in a situation where you have a six month hard money loan but the permanent loan lender requires six months seasoning before they will do the refi.  So, have the refi arranged before starting and know what their restrictions are.

Thank you!

So would a permanent loan lender need six months if we've worked together before?  My conventional lender has done 4 new and 2 refis for me in the last 3 years and knows my numbers.  So if the numbers are right, I shouldn't *have* to wait that six months, right?  I have a track record as a buy and hold.  Or does that work differently when you do it this way?

appreciate your input!

Your permanent lender may still have seasoning restrictions.  Many require you to own a property for at least six months before they will do a refi.  Some require a year.  This assumes you want to use a new appraisal.  If you just want to use the price you paid (and maybe documented rehab expenses) as the "value", you may be able to do it sooner.

Also be aware of restrictions on cash out refis.  If you just want to refinance the amount you owe the hard money lender, its usually pretty painless.

You're probably also looking at 75% LTV maximum on the refi.

Originally posted by @Tammy Vitale :

Thank you!

So would a permanent loan lender need six months if we've worked together before?   I have a track record as a buy and hold.  Or does that work differently when you do it this way?

appreciate your input!

We have two lenders local that will do cash out refinance loans up to 80% of appraised value,  as soon as a property is completed.

Doesn't seem to be the norm from reading the forums so as @Jon Holdman mentioned , its important to clarify any seasoning requirements with your lender. 

If you have a track record with a local bank, a call to your loan officer should be able to get you question answered pretty quick. 

thanks to both of you!  I wouldn't be doing a cash out refi anyways, so it looks as if what I want is the easier of the two (yay! for once!).

Good to know what I need to consider - I wouldn't have thought of that.  

Much appreciated!

and yes - 75% has been my max on the last 4 houses I bought.

Hi @Tammy Vitale

Hard money lenders will issue LOIs (Letters of Intent) to fund specific properties. If you plan on purchasing or are in contract to purchase a property, based on the property type, purchase price, the cash you plan on bringing into the deal, and the loan term you want, the lender should be able to tell you "Yes, I'm interested" or "No, this is not a good fit for me." If it's a yes issuing an LOI should take no longer than an hour.

Regarding your question: "Should I talk to a hard money lender before making an offer to purchase?", it's up to you-- but you need to make sure you are within the lending guidelines of the lender you are approaching for your deal. Last week I closed a loan on the purchase of a $2.6M property-- the borrower who purchased the property approached us already in contract.

Hard Money Lenders can move much more expediently because we don't have the same hurdles as conventional lenders.

Hope this helps, best of luck. 

As the other posters have mentioned, you should most definitely speak to the hard money lender to get a sense of their terms and whether you prequalify. What the state on the website, may not be in fact accurate. More specifically wall the website may indicate that you do not qualify, after speaking with them you may find that they are still willing to work with you
Originally posted by @Zoran M. :
As the other posters have mentioned, you should most definitely speak to the hard money lender to get a sense of their terms and whether you prequalify. What the state on the website, may not be in fact accurate. More specifically wall the website may indicate that you do not qualify, after speaking with them you may find that they are still willing to work with you

 Very sound advice from at Zoran

Thank you!  I appreciate the input!

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