Leverage: Hard Money VS. Traditional Financing and Rehab Loan

Rental Property Investor · Redondo Beach, CA · Member since 2019 · 9 posts · 1 vote

Hey Everybody!

I am looking to put together my first deal in a couple months and I was brainstorming creative ways to do it. Originally I was thinking about going the hard money route, but am worried about the holding costs before refinancing if something goes wrong. Another idea I had was to just buy the house with traditional financing and get a construction loan to cover the rehab. Is this a possibility or does anyone have experience doing this? What terms could I expect for the construction loan?

Thanks in advance for your help!

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Garrett Hardin:

@Jay Hinrichs Thanks for the reply. I'm actually looking to invest on the east coast which I just moved from. Guess I should have specified that. Sounds like I need to do some more research into the lenders in the local area, but good to hear HM is a little softer these days

East coast lenders will be more expensive than most west coast especially if its a long foreclosure time line state like NJ or NY..

best rates are in CA then everything else gets a little higher.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
on the west coast HML are only a point or two higher than a bank.. and there are very few banks that will do purchase and rehab loans.. unless your a premier depositor.. they just don't offer that product to the general public.
this is why HML companies especially in CA have exploded and there is so much capital that its a race to the bottom on interest and points.. I mean its basically come down in HALF from when I used to loan HM just 10 years ago.
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Garrett Hardin
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Rental Property Investor · Redondo Beach, CA · Member since 2019 · 9 posts · 1 vote
7y
@Jay Hinrichs Thanks for the reply. I'm actually looking to invest on the east coast which I just moved from. Guess I should have specified that. Sounds like I need to do some more research into the lenders in the local area, but good to hear HM is a little softer these days
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Garrett Hardin:
@Jay Hinrichs Thanks for the reply. I'm actually looking to invest on the east coast which I just moved from. Guess I should have specified that. Sounds like I need to do some more research into the lenders in the local area, but good to hear HM is a little softer these days
East coast lenders will be more expensive than most west coast especially if its a long foreclosure time line state like NJ or NY..
best rates are in CA then everything else gets a little higher.

Podcast Guest on Show #222
JLH Capital Partners51 Review
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
7y
Originally posted by @Garrett Hardin:
@Jay Hinrichs Thanks for the reply. I'm actually looking to invest on the east coast which I just moved from. Guess I should have specified that. Sounds like I need to do some more research into the lenders in the local area, but good to hear HM is a little softer these days

Hey Garrett. @jay hinrichs is absolutely right. West coast rates are better than we have out here, but we've seen some compression in rates and fees as well. For a new investor, fix and flip money has come down to about 10% and 3 points and generally 80% loan to value on the purchase. That's a marked difference from the 12-14% and 2-4 points of 5 years ago.
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Garrett Hardin
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Rental Property Investor · Redondo Beach, CA · Member since 2019 · 9 posts · 1 vote
7y
@Stephanie P. Is that 80% LTV for ARV or for LTC?
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
7y
@Garrett Hardin
80% on acquisition
70-75% of ARV depending on lender
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