Investor from South Jersey new to HML. Looking to expand into multi's and am considering HML for financing.
I would greatly appreciate some pointers on what to look for as well as what to stay away from. Ideally, I'd like to use private money as a form of leveraging rather than to use personal capital and risk losing future projects due to lack of liquidity. Does that sound like a good strategy?
I look forward to all suggestions and criticisms.
Hard money isn't really for buy and holds. Its just too expensive. Great for flips where you don't have the house very long, but it wrecks your numbers on buy and hold unless you absolutely steal the property.
Private money is great for what you described, you just have to find a willing lender that does the right terms. That is through your network, you wont find anyone to fund the last 10-20% of a RE deal so you dont have skin in the game unless you have a solid relationship with them. It can be done, I have 10 right now and have none of my own money in them, but I've been at this a while and have some wealthy friends who know me and my ethics very well.
The one other thing that I will add to what @Darrell Shepherd said is that if you come across a deal where the numbers work awesome, and one of the terms of you securing the deal is a quick close than consider looking at the numbers to secure the deal with a HML but start the process of converting to something with better terms ASAP, whether that is private money or conventional financing.
HMLs make their money on the up front points, so if you're going the short term route, consider trying to negotiate with the lender for lower points in exchange for higher interest payment. This will effect your monthly cash flow if you hold the property too long, but if you're using the money to secure quickly and for a short term, this could work out better for you.
If you can qualify for conventional financing, your closing costs and interest are going to be lower than a hard money lender.