Hard Money Loans: How do you afford repayment?

Question

How do you properly use a hard money loan to purchase a rental property and then repay the lender what was borrowed plus the interest (or points)? Do you borrow the full amount of the purchase price from the HML or is it "easier" to only borrow enough money to make a down payment on a property?

Darrell Shepherd · Answer

You cant really borrow down payment money from a HML, not really what its for. They don't like to be in second position.

The only time a hard money loan makes sense for rental property is if you are rehabbing to refi and keep yourself as Joe said (and occasionally an exceptional deal where the cost of the capital is eclipsed by your increased money costs). You want longer term money for rentals. LimaOne Capital and LendingHome both have long term products that came out in May, LimaOne's is better IMO. Really, though, you want to exhaust bank money before you start using that stuff or commercial loans.

JD Martin · Answer

My criteria for sell or hold is how much cash flow the property produces, how much return for flipping the property, and how easy I can replace it with another money maker. And, since I do all my own rehab work, how much blood, sweat and tears are in the property. If it was a simple rehab in a neighborhood hard to rent, I would flip.

Joe Villeneuve · Answer

Almost immediately after rehab at 15year...then refi again in 6 months at 30 year

Joe Villeneuve · Answer

Depends on the lender. I use ones that do it both ways.

Joe Villeneuve · Answer

Yes

Daryl Canard · Answer

@Darrell Shepherd So a HML is used more to buy a fixer upper, rehab it, and then rent & refi? It wouldn't be a good idea to use it on a turnkey property then, right?

Also, if buying a fixer upper, what would be the deciding factor on whether just to flip it or rent it? Just personal preference?

@Joe Villeneuve could you also use a 5/1 ARM right after rehab & then a 30yr?

Robert Bacher · Answer

Joe, Can you refi fairly quickly with a 30 year fixed rate and at what LTV?

Daryl Canard · Answer

@joevilleneuve

Thank you!

Hard Money Loans: How do you afford repayment?

Hard Money Loans: How do you afford repayment?

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