Hard Money Lenders - How exactly do they work?
Hello everyone,
I posted a forum topic a few days ago regarding hard money and how it could be used to creatively finance a deal. Well, after thinking more on the topic, I realized I was still fuzzy, and I was simply hoping for some guidance.
With a flip deal, it seems pretty straight forward. One could potentially use HML to purchase and rehab. Then sell (hopefully with increased value through the rehab) and pay back the HML, with some profit left over for yourself.
However, I would be interested in using hard money for a buy and hold rental. Using a HML to help finance and rehab, then refinance into a conventional mortgage, pulling out cash to repay the HML. This is where it gets a bit fuzzy for me. When you refinance (or maybe technically finance) into a conventional mortgage, is the equity you gain the entire value of the property since you're not refinancing from a previous mortgage loan? Also, I know that when you (re)finance into a conventional mortgage, you'll still have to put down 20-25% based on the property. I assume you'll want to make sure the property increased in value enough to both pay back the HML and have some left over to put toward the down payment?
Any help would be greatly appreciated! Thanks!