Upfront Fees for a Hard Money Lender

[Jason Hatfield]

Hello all!

I wanted to ask if the following fees seem in line for a Hard Money Loan:  

$700 at time of application submission for SOW Review, Renovation Cost Validation and an Appraisal.

$175 Draw Schedule Review

$235 Document Processing

$350 Lenders Attorney

I've only used HM once before on a flip I did in 2005 in Massachusetts.  I now live near Baltimore and I'm not sure if this is common for this area.

Thanks!

[Nancy Roth]

@Jason Hatfield

Not sure you are asking the right question. IMO the right question is: will the deal make money? 

I tried to compare your costs to those I paid for my recent hard-money loan for a Baltimore rehab, and the expense categories don't line up well, so it's impossible to get a clear idea. But just eyeballing the numbers, it looks like I paid more than your lender is asking. My lender operates in Northern Virginia, where everything costs more!

But I'm a first-time rehabber, and this was the best loan I could get. Maybe I could aim for a lower-cost loan next time. But for now, I expect to clear a nice profit, so I'm not that worried about it. 

Also, you didn't tell us the interest rate and points on the loan. Consider that conventional banks often charge more points on lower-interest loans. So if you got good terms on the loan, perhaps you can justify paying higher upfront costs.

Guess the other question is, is this the only lender that will work with you? Maybe you need to build up a track record and some relationships in MD to get the advantageous interest rates you want, and for now you have to take less-than-stellar terms. 

If this is your situation, but the deal is a moneymaker, I'd say, go after the deal. If the terms of the loan are going to make or break the deal, it's not a deal.

Good luck, Jason, and let us know how you fare.

Nancy Roth