Hard Money Lenders and Mortgages

[Lee Castro]

Is getting a mortgage and hard money loan a bad idea for a first flip? If I have $2,000 to $4,000 to show a hard money lender I am all in and it is accepted is this a good idea? Is this possible?

[Andrew Postell]

@Lee Castro there are so many HMLs so it's hard to share "definitive" rules to this but I can at least explain the concepts. In general, a HML will lend you a % of the ARV of the property. Again, in general, many will lend up to 70% and some up to 75% of the ARV. So if you purchase and rehab below 75% of the ARV...then in theory, you could purchase for $0 out of pocket. Now, in reality, most HML will want something from you even if you if it's your first time working with them. So coming out of pocket $0 on your first deal is not likely even if you purchase and rehab well below market value.

You will need money to make payments to your loan while the rehab is going on...and if you are flipping, while the property is on the market.  

There are also Hard Money Lenders that don't check credit, don't need appraisals, and on, and on, and on. I would certainly suggest interviewing several different HMLs to get an understanding of what is possible and what to expect.  This will also help you "feel out" the lender to see if you like them or not.  Some lenders will be identical on rates and fees....then how do you decide who to use if the fees are the same?  Keep exploring and keep asking.  We're here to help if you need anything else.  Thanks!