I’d like to preface this by saying I currently have no investment properties, just a curious future investor!
I’ve done a lot of research lately about Hard Money lenders. I know they can be incredibly risky, but also a great tool if used correctly!
My question is, if you get a HML to contribute 90%, meaning you'd put 10% down, is it possible at the end of the term when you have to pay back the lender, you refinance the property he/she helped finance?
Further, say you have a majority of the money owed available, (accumulated through cash flow/other savings), Is it possible to refinance the equity you've accumulated over the year to pay back portion of the HML you do not have?
Yes you can refi out of a hard money loan as many do. Just to clarify tho using a hard money lender isn't a "risk" it's a cost. The same way using a painter is a cost and not a risk. Factor in the costs and figure out where you stand before you get into a deal that isn't a deal
Whatever exit strategy you use, it needs to be figured out in advance as most HML's are short term (and expensive). This is what can really hurt a flip as taking 200 days instead of 90 can eat your lunch.
Yes you can refi out of a hard money loan as many do. Just to clarify tho using a hard money lender isn't a "risk" it's a cost. The same way using a painter is a cost and not a risk. Factor in the costs and figure out where you stand before you get into a deal that isn't a deal
Yes you can refi out of a hard money loan as many do. Just to clarify tho using a hard money lender isn't a "risk" it's a cost. The same way using a painter is a cost and not a risk. Factor in the costs and figure out where you stand before you get into a deal that isn't a deal
Well said. Refinance or sell to pay off a HML. Many HML also offer 30 year rental loans, that don't have the same income requirements as banks. Rental loans are based on DSCR, debt-service coverage ratio. It is a fancy way of saying Rental income vs rental expenses. Careful though! Many lenders have different definitions of rental expenses... do you include vacancy, maintenance, utilities etc? Obviously you would want to cash-flow a certain number to be comfortable, the lender likewise wants you to cash-flow a certain number to be comfortable. Note that these loans don't typically include any kind of personal/company income. ONLY the property's income.