Lenders and their terms

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I really think some lenders put a bunch of terms in a box, shake it up and pull out a hand-full of terms and read them off to you. So today I spoke with a few lenders which if you dont shop around your in the wrong business. One of the companies who I should add came highly praised by BP. I figured they must be great.

The deal I have in place is a lot which has to be subdivided but thats no problem. The lot can fit 8 houses no problem. The houses would be 3 story 2700 sq ft each, cost 170k to build, ARV at 500K easy. The lot cost was 400, beat them down to 340K. If you do the math this deal works all day long.

The lender turns around and tells me he wants 15% up front on closing costs, another 20% of the entire project cost in escrow, 15% of the construction budget in my bank account, at least 25% of the total project should be in my bank account as well to " get rolling" in his words, in addition he wants me to have 12 months of payments on reserve as well as 50K incase things go south. What? So, you want me yo have almost the entire project cost in my bank account, why on earth would I even use you?

Next lender: Terms

7% at closing

2.25 points

12 month loan

Fund upon foundation completion

Minimum 6 jobs completed

Ok not too bad if you ask me. Two companies, same project totally different terms. This company doesn’t even come highly rated yet has better reviews and makes way more deals in PA. Insane, complete madness I tell you.

In the hard money world, more conservative lenders have the best rates/terms/etc. They are taking less risk, and risk is always baked into your rate/fees. These more conservative HML with better rates/terms/fees are ALSO way more likely to pull funding at the last minute. You should bake that risk premium to you into YOUR calculations too -- cheapest price is least reliable. 

I don't do hard money (in no small part b/c no one understands that dynamic & thinks I'm out to score an extra buck or something when I quote a 'happy medium' that balances the risk with the rate/fees/etc with my desire not to waste my time on loans that are likely to be pulled at the last minute), so there's nothing in it for me either way, just something to consider.