Hard Money Lending Criteria

[Ginger Brown]

I'm talking to some hard money lenders and I know this question does not have a simple single answer but what are their typical requirements for a single family deal? What are they looking at for a difference between cost to ARV? Haven't done a deal with a hard money lender yet and am still getting my head around the fact that they don't care about all the things conventional lenders do.

Thanks

[George Despotopoulos]

@Ginger Brown - we look @ a variety of things, most importantly: credit history/score, liquid assets/reserves, source of down-payment, the property & deal's numbers, and experience. Private lenders (individuals lending their personal funds) have less requirements. 

Your credit score & experience will affect the leverage you're getting. If you're new to flips or rehabbing a rental, expect somewhere between 75% - 80% of purchase & 100% of rehab costs as long as that total loan amount is at or below 65% ARV. If you have some experience, then that may be bumped up by 5% - 10%, so 85% - 90% of purchase price & 100% of rehab, at 70% - 75% ARV.

The as-is value & ARV will be established in the appraisal or interior broker's price opinion --whichever the lender requires. It's a sales comp approach, so I would pull some comps w/in a mile of the subject property for both the as-is & ARV. It would be helpful to send those to your HML but not required as ultimately the valuation report will be what's relied on.