Hard Money loan question

7 Replies

Hello BP,

So I have been doing a lot of reading and research on this topic and am still a little confused. I have potentially found a deal in the Bay Area that I would like to move forward on. I am looking to find a hard money lender who does at least 70% ARV loan, I do have money saved and I have access to capitol as well. Now before I write an offer do I need anything from a HML? Like a pre-qualified letter or anything of that sort? Also how long can a HML take? I haven't even reached out to one yet being we have been looking for deals. I would assume they are all different but have the same concept.

I guess any advice on this or even HML contacts in the Bay Area would be great.

Thank you, 

all sorts of HML in the bay area most will want 20% of cash equity into the deal regardless of ARV... so with big Bay area prices cash requirements can be quite high to get the HML.

and yes you will need a pre qual if any seller or a seller is represented by agent they will want to see this..

good luck

HML can usually fund once they want to do business with you... in 5 to 10 days. with out to much problem.

rates are decent in the bay for HML 1 point and 9% being common.. not really that much more than bank rates frankly. I am not sure if he is still in business but when I lived in Palo Alto I did a few specs and used Dick Coker he lived in LA hills right next to you and had an office on Homestead by 85... he was very good..

Originally posted by @Jay Hinrichs :

HML can usually fund once they want to do business with you... in 5 to 10 days. with out to much problem.

rates are decent in the bay for HML 1 point and 9% being common.. not really that much more than bank rates frankly. I am not sure if he is still in business but when I lived in Palo Alto I did a few specs and used Dick Coker he lived in LA hills right next to you and had an office on Homestead by 85... he was very good..

 Thank you Jay! I guess where I'm getting confused is how much will they lend. On our personal finances we have been approved for 700K and that isn't enough to get us 1/1 condo in the area. I guess is it OK to look at 1MM homes or is that something I should discuss with a lender before we even offer? 

I will look up Dick Coker and see I could sit down and meet with him. 

Thanks again 

WEll when you live in one of the most desirable places in the world with incredible weather and job opps of the high paying type.. that's what happens  :) 

no matter what the price lenders in this environment will want whats called skin in the game , the days of 100% loans based on ARV are long gone.. ( unless your a very established repeat client Like my guys I do this routinely for my clients but they have been with me more than a decade and in many cases we are well over 200 transactions together)

So starting out as you are ... a HML will want at least in all the deals in the SF BA I have been presented with ,, they want 20% and sometimes will want you to also fund the rehab out of pocket.

So take a 1 mil purchase and 400k rehab ( pretty common numbers) and an ARV of 2 million ( again pretty common numbers.. HML in that case may only loan 800k total and you will need 600k for the job.. so you either are very well cashed up or you have equity partners.. and that is what I get approached with is an equity partner... I have not done one yet in the BA as of yet... Have been working in Sac were the numbers are more my speed LOL.

are you trying to buy something to live in or flip.. ? HML rarely make owner occ loans these days as well..

@minh le   maybe Minh can chime in I don't really know how to tag people if they are not on the thread.. but look him up very knowledgeable and there are some really great investors that have meetups.. I would highly suggest you go to some of those.. so you can get to know who the players are and what the ground rules are.

Originally posted by @Jay Hinrichs :

WEll when you live in one of the most desirable places in the world with incredible weather and job opps of the high paying type.. that's what happens  :) 

no matter what the price lenders in this environment will want whats called skin in the game , the days of 100% loans based on ARV are long gone.. ( unless your a very established repeat client Like my guys I do this routinely for my clients but they have been with me more than a decade and in many cases we are well over 200 transactions together)

So starting out as you are ... a HML will want at least in all the deals in the SF BA I have been presented with ,, they want 20% and sometimes will want you to also fund the rehab out of pocket.

So take a 1 mil purchase and 400k rehab ( pretty common numbers) and an ARV of 2 million ( again pretty common numbers.. HML in that case may only loan 800k total and you will need 600k for the job.. so you either are very well cashed up or you have equity partners.. and that is what I get approached with is an equity partner... I have not done one yet in the BA as of yet... Have been working in Sac were the numbers are more my speed LOL.

are you trying to buy something to live in or flip.. ? HML rarely make owner occ loans these days as well..

@minh le   maybe Minh can chime in I don't really know how to tag people if they are not on the thread.. but look him up very knowledgeable and there are some really great investors that have meetups.. I would highly suggest you go to some of those.. so you can get to know who the players are and what the ground rules are.

 Again thank you for the info! We are looking to flip as that is pretty much my day job. We will at some point get into buy and holds out of state (in or near our home towns) but not in the Bay. 

Just looking at your numbers we may have to start in the East Bay, yes we have cash saved and capitol at our expense but not that much LOL. 

I would love to go to some meet ups! So if anybody knows of any in Silicon Valley let me know, we'll be there for sure. 

Hey @Christopher Adams ,

You can find HML who will do leverage as high as 80/80 loans in the Bay Area. Specifically, they will loan 80% of purchase plus 80% of rehab. So, if you have a $1m purchase price and $200k rehab they will lend you $960k, leaving you with a $240k gap to fill. They will charge you about 2 points and 10%, depending on the term of the loan, your experience, etc. Rates will drop a bit as you build a relationship with them. Most hard money lenders will want "skin in the game" in the form of your own cash as Jay said, but there are others who don't care if you fill the gap with private money in 2nd position.

The first time you do business with them it will take a solid 10+ business days for them to approve you.  It will be much faster the next time around after they have all your docs.

If you are buying from anybody represented by a broker they will ask for proof of funds. Once approved the hard money lender will provide you a POF letter.

Happy Hunting!