HELOC and Hard Money?

Question

We were approved for a HELOC for $18,800, but with alll of our funds (including the HELOC), we'd just have ~43k. In our area, multi-family homes are 250k+ and we have to put 25% down, and so we are very short on what we need, especially if anything needs repair (even our own home!). Would it be wise to take hard money, and then pay off the hard money loan with the money from HELOC since that rate is so much lower than what hard money's rate is?

Kelly Conrad · Answer

Hey @Albert Bui, thanks for the response! We haven't purchased any properties (except our home) yet, and so we haven't worked with any lenders yet on this. The one I looked at does 70% ARV. I am just looking to see what other money options (besides asking family for money) could pair nicely with the large chunk we got from the HELOC to get things moving along. Ideally we'd like to do BRRR, but depending on the available units and how much money it is, we need a place to start.

Albert Bui · Answer

Kelly it depends if the hard money  lender or HML would allow you to put less than 20% down. I've received less than 20% down on mine but I've done many deals so that might be a different scenario. How many deals have you done with this HML and will they be willing to lend above 80% LTC (loan to cost)?

So I guess the point im trying to make is normally you need to bring your own 20% equity or cash or funds to do the deal, but yes there are HML's who lend 100% LTC up to 75% of ARV (after repair value) or some are 90% LTC up to 75 or ARV as well.

Albert Bui · Answer

70% ARV but up to what 70% LTC (loan to cost) ? That means min 30% down but 70% ARV/90% LTC means as low as 10% down if you find a good enough deal so when talking with the HML you clarify that.

If you do clarify the above they  will know you've done your home work because most new borrowers and most often residential lenders won't even understand the above, just a tip.

Plus if you clarify the above you may save your self from having to put down 10% rather than 30% of the deal capital needed.