Should you get a Multi-Family under contract first with a HML ?

Question

If you are considering to use a Hard Money Loan, should you get the property under contract first then reach out to lenders, or should it be the opposite reach out first to a Hard Money lender then get the property under contract? What Steps would you take for a Multi-Family ?

Joseph Cacciapaglia · Answer

You should always reach out to lenders prior to making offers. Good lenders will always go through financing options with you on a deal prior to you making offers. If it's a 2-4 unit property, most HMLs will provide a pre approval lender to submit with your offer. Once you get to 5+ it's much less common to get a pre approval, but they will typically give you a soft quote. Not knowing what financing is available before making an offer is like going shopping without knowing if you have money in your wallet. Lending programs, pricing, and availability can change rapidly, especially in today's environment.

David Beasley · Answer

@Bradley Laddusaw thanks I will be in touch soon

Bradley Laddusaw · Answer

@David Beasley, as a Hard Money Lender, we prefer that our clients reach out prior to so we could take a glance at the asset.  Yes, we are able to act real quick, but we may pick up a red flag or something on the front end that could affect your acquisition.  With that being said, we are a little more hands with each file vs. some of these larger companies that happen to be on Pause for the time being.

Our clients like to know where we sit from a leverage side of things as it may dictate where they submit their offer price at.  Again, each company is different but this is how we add value to our clients.

Feel free to reach out to me directly if you have any questions.

Odie Ayaga · Answer

Definitely lender first ESPECIALLY in this environment. Lending is changing day to day. You may have a lender today that isn't lending tomorrow.

Rosanna Delacruz · Answer

@David Beasley

I’ve thought of using an HML to purchase a small multi family (6-10 units) then refinancing out of the loan in 12 months (I have a credit union that offers 80% LTV on cash-out refi (15 yr Arm at every 5 years in a 20 yr amortization schedule) Any thoughts? Has anyone been successful with such a strategy- going with the HML allows me to only bring 10% of purchase price vs. the 20% most lenders require on multi family commercial loans

David Beasley · Answer

@Joseph Cacciapaglia thanks I appreciate it

Yoni Benimetzky · Answer

Hey David, Usually you'll want to have the property under contract before talking with any lenders. The only reason to reach out to a lender first would be to make their acquaintance. HML work fast and will need due diligence items from you that you may not have until after you're under contract. They also wont want to waste time with you, being under contract shows that you're moving in the right direction.

Should you get a Multi-Family under contract first with a HML ?

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