Private/Hard Money lending downpayment

3 Replies

Landlord is selling the 2 family NYC home we live in & the lady and I are trying to figure out how we can buy it to use as an owner occupied property. The house is in a neighborhood that is quickly growing in popularity & has enormous potential. The place needs work (new roof, windows & some interior upgrades) and is sold As Is. Although it is expensive (NYC), and can probably be reduced, it will unquestionably gain substantial equity with these improvements based on comparitive market analysis- much of which I can either do myself or have done with multiple contractor connections (my mother has 30 yrs property manager experience in nyc). Wondering the possibility of using hard/private money to finance the 20% downpayment to avoid MIP, etc while we use our own resources to fund the renovations. Hoping to refinance to payback inital investors, who will gain the interest & points during this process. They make money while being secured by the lien, our “skin in the game” is the renovation costs & labor, and we gain a permanent residence that we can replace rent costs with comparable mortgage, while renting out the other apartment & 2 parking spots. Based on current trends and similar local home prices, there is almost instant equity to be made and our growth risks are limited being in a convenient & growing NYC neighborhood. Any thoughts concerns or suggestions would be greatly appreciated.

Hi there!

I would suggest ( if you haven’t done so already) that you move forward with confidence that you’ve done the proper amount of due diligence and that this is a solid deal.Don’t procrastinate, sometimes we can analyze over and over again and the only thing we’ve wasted is time.

Execute your plan intelligently and stay in top of all aspects of the deal. Ensure that the contractors complete the job with quality and minimize cost overruns because obviously that cuts into your profits.

Look to do some of the work yourself. For example, tiling is not that difficult and,if anything,maybe you can work with the contractor on the rental unit’s renovations and take that experience and do your home’s renovations yourself.

Your deal sounds great and I look forward to hearing about the success you’ve had with this one and the many more to come.

Hard money lenders don't typically lend on owner-occupied properties. 

It sounds like your looking for someone to take a second lien position AND essentially finance the property at a 100% LTV when combined with the first mortgage. That's going to be a tough sell.

You might have better luck looking into FHA loan programs that don't require 20% down. There's even a FHA loan (203K) that can help with the rehab costs. Or perhaps even approaching your landlord about owner financing.

If you want the investor to put up the 20% and then you try to qualify for hard money? How do you split the equity. A hard money lender would lend you 80% LTV and your investor and you can form an LLC etc. This would not be a conventional loan. Hard money lenders loan based on Equity, LTV and put less weight on all the other stuff. Dont oversell them on the big rainbows, they want the brass tacks. Showing you have thought out some of those details is good. Just look out for points and interest. If the deal can not support a hard money lender then it might not be that good of a deal. To you and me it always seems like its a good deal but these guys dont always see it that way.

I would look at an FHA 203K loan -its a purchase loan and rehab money. You need 3.5% down, you will have PMI. The soonest best case scenario is most likely to refi in 6 months more like a year though.