Private lenders or hard money

8 Replies

This is wildly subjective. 1 year, 5 years, 30 years....it all depends on the specific investment goals of your lender, and will vary from lender to lender.  Depending on your network, you should be able to find a lender that suits your needs, though.  I hope that helps.

- JM

I want to get into multi family in Brooklyn but was wonder if I should use hard money to front the whole deal? and Will it eat up my cash flow the interest on the loan? And when I refinance will it cover the whole loan amount? 

@Mike Harris

Hey Mike, Let me see what I can do to help on these;

1. I want to get into multi family in Brooklyn but was wonder if I should use hard money to front the whole deal?

It should be noted that whichever route you choose for financing, be it hard-money, a private lender, a bank, or an equity partner, it is unlikely that you will be able to finance the entire deal (even if a seller 2nd is involved). Again, unlikely, not impossible. People have had success with creative financing structures in the past that allow them to go into a deal with no-money down, but it is an uncommon scenario. Most of the time, plan on bringing some portion of the project costs to the table. 

It seems that your original thread topic was on private vs. hard-money lenders. Here are a few points to consider;

- Private lenders will often be able to move more quickly on deals than hard-money lenders, and have more subjectivity in their lending guidelines.

- The issue I see people run into with private lenders is capital constraint; private lenders only have so much money to lend! With a hard-money lender, this is much less likely to be an issue.

2. Will it eat up my cash flow the interest on the loan? 

You want to be sure that you evaluate not only the interest on the loan, but also your total cost of capital. This includes things like fees, pts., etc. People use private and hard-money lenders to successfully fund their investments, but you will always want to make sure that the numbers work on a specific project.

3. And when I refinance will it cover the whole loan amount?

No. A more reasonable expectation is 65-80% LTV, with 80% being exceptional.

Hope this helps,

Michael

Originally posted by @Mike Harris :

On a FHA loan is it possible to act like u live there like putting ur mother to live there to collect ur mail

You can act however you want, but that scenario would be considered mortgage fraud. and if your mother is aware, she could also face some consequences.  If your investing strategy requires getting your mother involved in a mortgage fraud scheme, I think it'd be best to find a new strategy.  New York is a big state, there have to be other markets within driving distance that work better.