Looking for hard money experiences

5 Replies

Hi @Joshua Szentes !  You will find that there are a few schools of thoughts and that some people swear by private lending/hard money loans and others have a strong distaste for the high interest rates.  

Here's a quick run down on why you would want to go the private money route:

1. Need access to quick funding (traditional financing can take a month or more vs private money where they can close in a week or two)
2. Want to avoid banks and institutional loans
3. Need more flexible terms
4. Need to cross collateralize other properties (where traditional lenders often won't accept this)
5. Credit problems 

Private money / hard money lenders will finance and provide you a loan on the After rehab value (ARV) so you can finance the rehab costs. Anyone lending you money wants to make sure that you have skin (aka money) in the game and that you have the money and resources to support the rehab process, holding costs and are going to provide their money back. Number one rule of money, is don't lose money!

In summary, it's all about finding the right deal and deciding what route you want to go.  I hope that helps!  


Hey, @Joshua Szentes I am currently looking for a project and I'm going with the Hard Money route, although the terms seem intimidating its really just funding to get you into the deal. Depending on your exit strategy you most likely are only using the HML for a few months. What type of property are you looking to pickup?

Yes they do we borrowed at 100% but that doesn't necessarily mean it's the right option for everyone. Sometimes it's better to pay a higher down payment for a tradeoff elsewhere

@Scott W. hit the nail on the head but one thing I'd add is, though the 12%-ish interest rate can seem scary, the loans are for short terms so you likely don't actually end up paying 12%. 

I think it's more helpful to think of HML/PML as the absolute cost to you. For example, a $100k loan at 2 pts and 12% would actually cost you $8000 for 6 months. And given PML and HML's ability to close quickly, that can often mean the difference between getting and losing a deal.

For instance, one of my current borrowers has the cash to finance the flip himself but he's using PML to avoid tying up all of this liquidity so he can purchase another flip if a good deal comes around. So even with the PML interest, he is still going to make more money than if he had funded the entire deal himself.

You can get any terms you want, but you'll pay thru the nose the stinkier (ie higher LTV or less experience you have).

Realize HM guys are looking for 2 things:

1) Getting paid back at a high rate, so you need a track record AND/OR

2) If you default, they get their equity back. Half-finished projects are not worth much.