Hard Money Lending, Fully Occupied Duplex

7 Replies

Hey BP!

Has anyone ever heard of a HML lending on a property that is currently fully occupied? From my understanding HML only lend on completely vacant properties. Am I wrong? If I am, could someone explain to me how a HML would work on a deal like this? Let's say a duplex and both units are rented. Anyone have any experience with this?

Thanks in advance everyone!

@Dalwin Garcia - You can find hard money for anything if it's a "good deal". Hard money is usually 2-3 points (2-3% of loan value) + 12-15% interest due in 6-12 months. Your goal is usually to renovate and sell, or renovate, rent and refinance, if you take expensive money like this. If someone is selling a fully occupied duplex, after you crunch all your numbers, I doubt if you paid cash you'd be getting more than 5-8% ROI on your money. That means that you'd be paying the hard money lender effectively more than your rental income. AND you'd have no right really to go in there and disrupt the tenant's lives to improve the units so you could get higher rents or sell the property for a premium. You also have to assume the terms of the lease (rent rate, end date, unfavorable legal clauses) when you buy a property occupied.

That's why it's usually not done. If you found a GREAT off-market duplex deal like driving for dollars or with a direct mail campaign, you may be buying it SO below market that you can afford the hard money loan and then can refinance it into a better loan in 6-12 months. If it was SO below market value, you could probably "wholesale" your contract to buy that property to another rental investor for quick cash in your pocket. 

If you really want to buy this occupied duplex, think about rich people in your life who may be much cheaper than hard money. Ask the seller if he or she will seller finance all or part of the sale. You can "offer" more money if the financing is cheap (e.g. I can offer $1,000,000 on a $500,000 property if you'll take 0% interest on my payments for 30 years.)

This depends all on the specific hard money lender. Lenders have different lending terms and conditions compared to their competition. My suggestion is to call a hard money lender and give them all the information on the deal and see if they would fund it. Pretty simple.

You can get a HML to purchase the property on a short term loan then refi out or you can find a lender willing to do a 30 year mortgage on the property as well it really depends on the scenario

but occupied properties aren't typically an issue as long as the occupant isn't the owner

Thanks everyone for your feedback! I really appreciate it!

Does anyone here use a HML calculator that they would recommend? We're looking to eventually do HM on buy and hold deals and I'd like to use some sort of calculator to analyze some deals.


My last deal was easy math:  .12 * loan balance = annual amount / 12 = monthly amount

Property taxes and insurance are separate. I paid 2 points, or 2% of the loan balance, up front. The payments can be made at the back end, or paid monthly. HML is typically interest only.