Hard Money Lending w/ traditional refinancing

4 Replies

How simple is it to find property and use hard money to finance the investment? 

What percentage of the mortgage should I have as cash or is a down payment still needed??

Also from that hard money loan, then in turn refinance with a traditional mortgage and begin renting that location.

@Bernicha Reid  Can't suggest how simple or hard it is to find a hard money lender but certainly look around and give him the deal. You will learn how simple or hard it is. All lenders have a set of criteria and they are not the same criteria. You may need to talk to multiple HM lenders.

This is also true of the percentage of the mortgage needed for a downpayment. Each lender has different requirements.

Generally on a buy and hold you will want to refinance with a bank because of the much lower rates. A flip or wholesale should not need a bank loan.

Originally posted by @Bernicha Reid :

How simple is it to find property and use hard money to finance the investment? 

What percentage of the mortgage should I have as cash or is a down payment still needed??

Also from that hard money loan, then in turn refinance with a traditional mortgage and begin renting that location.

 The trick with HMLs is not so much to find them (depending on the location and property type of course) but rather to find a property whose purchase and exit strategy makes sense to use HMLs. The numbers have to work. 

For a HML you will generally need between 10% to 35% down depending on things like credit and experience and HML loan type (presuming no seller financing or the like). You will also need very approximately around $8k in loan costs of one type or the other. You will also need money to carry the loan until you can exit via your exit strategy. If you are rehabbing then presuming the draws are in arrears at each milestone then you need money for at least the first rehab milestone. You should ALSO have extra money in case your rehab (if any) and exit strategy don't go as fast, as cheap or as optimistically as you estimated.

Yes your exit strategy can be to stabilize and then refinance to a conventional loan and begin your rental property empire. It can even be to refinance to a long term, fully amortized HML. If the numbers work.