I'm considering going threw a hard money lender. Questions I have is should I go to the loan company first before looking for a house or should I find a house first and then contact the loan company? I know hard money has a higher intrest rate but also allows you to get inn and get things started. Does 100% on rehab and home still exists with hard money?
Contact the lenders first. See what they are providing and the cost they charge for it. See what their parameters are.
After that search deals that will work for the money you have available to you.
I've financed every flip through hard money and this is a great question. I don't think there is a right or wrong way to go about it. There are positives for taking both approaches in my opinion. If you find a property before you reach out to the lenders you can have a solid presentation to hand over to them and will come across as professional and confident. They will absolutely like that. On the flip side reaching out before you have a property gives you a chance to introduce yourself and build a relationship while you look for your project. Several lenders will even evaluate deals with you before you make an offer. Personally I think it's best to reach out first talk about your game plan and feel out rates and terms. That was how I approached my first flip and I still do several loans with that same lender. As you take on more and more projects lenders will reach out and your network and options will continually grow. I currently work with 3 different lenders and have taken the same approach with all 3. Hope this helps!
100% rehab funding is also common. As long as the total cost of rehab and the loan is under the lenders wanted LTV (70%-80% is the norm that I've found). Even then I have found several lenders that will stretch their numbers to make a project for you.
@Gabriel Ayala I'd be happy to answer any questions you may have is you want to message me. I'm a local TX lender and happy to help however I can.
Gabriel Ayala ..... If you PM with your email I will gladly provide you a copy of my loan products we have with our guidelines. We are a National Hard Money Lender in Austin TX always here to help fund your next project.
We're a local, direct hard money lender for Houston and we'd be happy to meet you and answer any questions you might have.
We can lend 100% of cost - we just have to stay at 70% or better loan to value.
Meeting before you have a deal under contract can help you make sure you understand everything and feel comfortable with us as your lender when you're negotiating with sellers. Meeting after you have a deal under contract is more real-world of course - happy to help either way!
Principal, Little City Investments
@Gabriel Ayala - the straight answer is 100% financing is not common in the Houston market. I see a ton of lenders offer it, but it almost never ends up that way when it comes time to sign and close. Also to answer your question, you definitely want to get approved by a hard money lender BEFORE you find a house. The market is too competitive not to have your ducks in a row before hand.
It is a good idea to consult with a few lenders while you are looking for an investment flip. You should know the lenders’ requirements for down payment, points, interest, other fees and conditions. This will give you a good idea of how much house you can buy based on your available funds. Many lenders require 20%-30% down and then they will finance 100% of the fix up costs. Fix-up money are controlled funds that are paid out as work is done (milestones are hit).
Get to know your local private money lenders at real estate investment clubs and association meetings. Try a google search or meetup.com. You can get good referrals from your fellow flippers that way as well.
Also, to help you analyze lender costs and project profits, there are a number of good “flip calculators” available. Try a google search to download one you like. It can provide side by side analysis for comparing lenders’ terms or in projecting potential profits.
Good luck with your projects,
@Gabriel Ayala - Do your homework! Interview multiple lenders, and not only Hard Money/Private Money Lenders. Be prepared to come up with cash out of pocket. E-Mail me at [email protected] and I'll forward you a check list of what to avoid.
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