Vineland, NJ · Member since 2016 · 42 posts · 6 votes
Hey guys. I'm currently in the process of looking at properties to flip. I have a team in place to do all of the work and we believe we have a few properties that we can get rehabbed in 2 months tops. I was on realty shares looking for funding and saw that it loans are as low as 9%. Is this a common rate? Would you consider it a good rate for 85% of your project ?
California, MD · Member since 2017 · 17 posts · 14 votes
9y
@Shawn Munoz That seems to be within the range of rates advertised on some of the other lending sites for flips (high single digits to low double digits).
California, MD · Member since 2017 · 17 posts · 14 votes
9y
@Shawn Munoz That seems to be within the range of rates advertised on some of the other lending sites for flips (high single digits to low double digits).
Investor · Chicago, IL · Member since 2008 · 80 posts · 24 votes
9y
Shawn Munoz , Steven is correct. Realty Shares is one of several crowdfunding lenders and most lenders in that space are in the high single digits to low double digit range. That range is determined by a number of criteria; for example, LTV (loan to value), the borrower's previous experience (how many flip have you performed), and credit score.
Remember, from a lender's perspective, the greater the risk, the higher the interest rate (and sometimes points) will be.
Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
9y
But that rate is not what you pay for the loan. Your cost of capital is much higher since that is the rate paid to investors on the platform. You will need to pay points and due diligence fees.
Real Estate Professional · San Francisco, CA · Member since 2016 · 22 posts · 8 votes
9y
@Shawn Munoz Rate is determined by experience and LTV. If this is your first ever flip and they are giving you an 85% LTV, than that would certainly be competitive.
Also, I wouldn't harp on the interest rate so much if you are holding the property for only 2 months. The difference between 12% IR and 9% interest rate looks something like this:
-Assume $100,000 total loan amount-
@ 12% Interest: (100,000)(.12)/12= $1000/Month
@ 9% Interest: (100,000)(.09)/12= $750/Month
If you are holding the property for two months the difference between the interest rates is $500.
For these short term flips, you should focus on three things:
1. Points for Origination of the Loan
2. What is the max leverage(least amount you can put down)
3. Will they fully fund your rehab?
Feel free to reach out to me with any questions, as I work for a Hard Money Lender and am happy to share my knowledge with you!