Does anybody know of a hard money lender that will allow you to wrap purchase price and wholesaler fees into the loan. I offered on a property and after seeing the wholesaler fee I noticed the fee was 24k. Based on how the documents are signed the purchase price is 88k with a wholesale fee of 24k. So just to get the house I am looking at 33k in downpayment and wholesaler plus 35k renovations it is more than I expected. What I am hoping for is a lender that will loan to me based of a 112k purchase price and not the 88k.
Hi @Charles Kao ,
This is an interesting question.
If the value is there in the property, the fee structure related to acquisition cost shouldn't be a big problem.
If you can find a Hard Money Loan with an LTV based on your After Repair Value (vs. Purchase Price or As-Is Value), you should be able to get financed almost as easily as with your originally expected price - regardless of the way the price + wholesale fee is structured.
Just remember to be clear with your Lender about how much you'll need up-front to close on the deal.
The biggest challenge will be your cash on hand, as depending on the deal you might not be able to borrow more than 65% - 75% LTV against the ARV, so you'll likely need $30k+ of your own money to get it done. This is a good chance to be strategic about how much you borrow toward the Purchase Price vs. how much you borrow toward the Rehab Costs (which are released in draws).
Thanks for the good question, hopefully it will also help others in the future! I have been asked this over the phone many times before as well, so you're definitely not alone asking about funky up-front fee structures that end up being necessary to get a deal closed.
Let me know if you have any questions, and feel free to reach out directly.
Doesn't sound like much of a deal if you have to bring 30k to closing. Most hard money lenders will balk at a 24k assignment fee. If the numbers fit 65% ARV minus repairs there are a lot of hml's that will fund 100% or close to it.
Agreed if I was asked to loan on this I would not do it based on wholesale fee being 1/4 or more of purchase price.. wholesaler needs to close on it then re market if they want to make that kind of spiff at least in my mind. I would just wait the wholesaler out when they don't close I would go direct to the owner and buy it there. if they can sell it before they lose it fine move on
@Jay Hinrichs I tend to agree with most of your posts as I see them quite a bit but I feel like that is being a little bit shady. I got the loan and the CMA done by the hard money lender was at 130k as is, so they structured it where I had to bring 15k to table and then all the rehab costs rolled in. Most of the wholesalers in this area that wholesale alot I feel are charging upwards of 20k for an assignment fee which I think is ridiculous but more reason for me to start my own marketing. @James McAlister I'll definitely reach out to you in future.