Delayed Financing and Hard Money Lending

7 Replies

Hi everyone, 

Need some help Bigger Pockets!  

I have a house undercontract, and I was going finance the purchase and rehab with hard money.  

Gatlinburg, TN

Purchase Price: 285K

Rehab Cost: 50-65K

ARV: 550-600K

Current Appraisal: 390K

Hard Money terms through AMZA are 10% down of the purchase price and rehab cost, 3.5% origination, and 8-9% interest for a 12 month loan.

2 questions:

1.  Is there another hard money lender with better terms?

2. Does anyone know of any lenders that will do a delayed finance, so after I am done with the rehab in 6-8 weeks, I can roll this into a conventional loan?  Trying to see if I can avoid holding this hard money loan for the full 6 month seasoning period required by many lenders.

Thank you in advance for any insight!


@Tri Le I know a lender that might be able to assist. She does purchase price & rehab costs in the same loan up to 75% ARV. We can't drop phone numbers in forums so please send me a DM.

My bigger concern here is where you are sourcing a reliable contractor for this project. It's incredibly difficult to find reliable contractors without having a local network on the ground. Even then, it can be difficult to get contractors to show up and meet deadlines. Even the mediocre ones are booked out months in advance.

@Tri Le

90% ltc

8-9% interest for 12 months

3.5 points

Those aren't bad numbers for hard money.

Try a local bank to roll out of the hard money before 6 months. Your next opportunity would be with a portfolio lender that has no to low seasoning. The rate will be higher than conventional and the cost will be higher than conventional, but you'll be away from the HML. Rates in the 5's on a 30 year fixed should be available.

In truth, it would be better to wait for conventional from a dollars perspective.  I've always counseled my borrowers to exhaust their conventional sources for financing first before shifting to portfolio, but if you don't qualify for some reason, that's the next best option.  You've got to get the property stabilized anyway.

Thank you Stephanie, this is wonderful advice.  

Avery, you have a good point.  Contractors are the source of my anxiety, and I have been burnt in the past with my other projects.  I definitely don't want a repeat.  

I do have an itemized scope of work, but I would like to vet the numbers.  

  My follow up questions are:

1. Anyone open to looking at the scope of work and the subject property offline with me to see if the numbers are accurate for the market?

Thank you BP, let's put this deal together!

@Tri Le , looks like you have some good advice already, but since it hasn't been mentioned I wanted to add the point that the conventional delayed financing rules don't allow you to refi out of a hard money loan - it has to be your money you are getting back (a HELOC works too). But hopefully you'll find a portfolio lender who will work with you. Good luck, looks like a potentially sweet deal!

@Tri Le look at private money or partnership or call around to other hard money lenders. I'm sure you can beat 3.5 as I have hard money lenders not that expensive. 

Also as someone has stated you cannot do delayed financing if it isn't your own cash or HELOC.

But hopefully by now you figured it out. Any other questions I'm here to serve.