Hard money lending question

4 Replies

Hey Bigger Pockets members,

I’m in the process of purchasing a 48 unit self storage facility. The seller is willing to do seller financing with 75 percent loan to value. That being said, I will need 120k for my down payment. Does anybody know of hard money lenders that would fund a down payment for a short period of time (6months)? 

@Seth Mceleney I do not know if any lender in particular, but I’m sure they are out there. The question is - will the project generate enough cash flow to cover the seller payment and the hard money interest payment? You should also have some cash reserves from day one in case something major needs to be repaired or replaced. Instead of a hard money lender you may want to consider a partner.

I purchased a commercial plaza a couple years ago with 100% financing (90% held by seller and 10 from a private lender). Cash flow is extremely tight and I’ve had to invest more of my own cash and borrow more to address a roof issue and replace a HVAC unit. I’m still glad I did it this way rather than having brought in a partner, but if I hadn’t had access to additional funds I would have been in trouble, so just be sure you know what you are getting into.

@Seth Mceleney I guess you are looking for hard money lender to finance the $120k (25%), right? This would be extremely difficult for hard money lenders as hard money lenders are asset based and they need borrower to have equity injection. In addition, they need to be in first position lien, not behind the seller financing. Your case would be perfect for private money lender. They fund based on relationship with the borrower. If they trust the borrower and know it's a good deal, they will fund. I don't know any private money lenders, just give you a direction.

@Seth Mceleney , what will change in the 6 months that will give you the $120K needed for the down payment?  Do you have other assets you can use as collateral, since as @Wenda Wang mentioned most HML will want to be in first lien position. You will either need a private lender or equity partner to get this deal done.

Thanks everybody for the information and guidance! We have decided to go with a private lender (a friend of ours). I’ll post this deal on my BP profile once we close!