Which is better, Hard Money or Private
I'm an avid listener, and recently listened to the podcast with Pace Morby today, but unfortunately none of that info could help on my current deal. I'm partnered on a short sale deal that I found, that we are planning to flip. The house was being short sold for $140,000, we offered $120,000 and they countered with $125,861.
The comps for the house are in the $210k to $230k range, with a repair budget to fix the house in the $25k to $35k range.
I had planned to use a HELOC, but the rep at the bank didn't know her own guidelines, and they wouldn't count my rental income towards my DTI unless it was on my taxes. (I had asked before choosing this bank). Since I purchased all my investment homes in 2021, none of them are on my taxes. I'm at a new bank that counts 75% of the rent towards income regardless as long as I show deposits of rent and the downpayment, which I can.
I need to get funds within a week, as we need to close on the 31st or we lose the deal. My partner doesn't have enough to cover me, so I'm asking friends that I know have money, but most of them are not investors. Tomorrow I'm planning to call about 15 to 20 hard money and private lenders, but unsure who's going to be more fair. I believe private money doesn't pull credit, but a hard money lender might. This would be bad for the HELOC in process, as they'd want answers to why I pulled credit.
At this point, the speed of the transaction is my bigger concern, but I don't want to give away all of my future profit by making a bad choice. Does anyone see one choice being better than another with my current situation?
For your question above, difficult to answer as better could have several different results by several different lenders and borrowers.
For your timeline, a private money lender from friend/family/contact would be your best bet here as a HML will pull your credit (likely) if you are a new investor with no track record with them and they will likely need an appraisal and take at least 10-14 days to fund/close the deal. Looks like you don't have the luxury of time here so go with the private money option here (based on your info provided).
#2 Starting Out Contributor
- Specialist
- Mendham, NJ
@Will Barnard hit it. Either way, you are stuck because you have to have money. Generally, private money is cheaper, but also has more of a potential of creating bad blood with a friend, etc. Hard money will cost you more, but you know the guidelines upfront, no matter how bad they are and they will happily let you keep using their money at those overages. When you miscalculate how a deal will go, it's usually better to just let someone else take it than try and force yourself into money which always comes with a hefty trade-off.
