Help understanding hard money

[Barry Hinds]

I’ve heard that hard money lenders won’t loan on 100% of the purchase price. But I’ve also seen some posts and have heard on podcasts where the borrower was able to purchase properties using hard money without using any of their own funds which one is true?

[Shawn Ward]

@Barry Hinds a HML will finance usually 80-90% of the acquisition and 80-100% of rehab.

1. For acquisition, you'll need to bring 10-20% (plus closing costs) to the table. The ONLY way you will not use your own money, is to have a PRIVATE INVESTOR finance the 10-20% for you as an investment partner. But, the money will have to come form somewhere.

2. The rehab, even though 80-100% paid by HML, is a REIMBURSEMENT. Thus, you'll have to spend money first, say $40k, then ask the lender to reimburse you. They'll send an inspector out to make sure you've done the work, then reimburse you for the amount you guys agreed upon.

All the best!

sjw