Hard money lender numbers vs mine

6 Replies

Hi all, posted this question on the diy page and got nothin.

Question is does anyone have experience in running rehab numbers to the hard money or private lenders that have had discrepancies? Im doing my own rehab all of it my self and wondered if i submit numbers to hard money underwriters i assume they would run numbers based on a contractor doing the work which im assuming would be higher than mine making the deal maybe not so good in their eyes. Im wondering if i should get numbers from my contractor friends and just use those and if i do it cheaper im ahead of the game on my budget. Making it appealing to the hard money lender.

Any input would be appreciated

If I were lending out my own money, I absolutely would use numbers from fully licensed, bonded, and insured contractors.  The reason is simple: what happens to the deal if you get into a car accident 2 hours after closing and are off your feet for 6 months?  All of a sudden those rosy "DIY" numbers are a NO GO and the project is stalled unless you hire it done.

Look at it this way too: you should be paying yourself for all that DIY work.  Otherwise, you're not an investor: you just volunteered yourself a job that pays nothing.

The HM lender is going to protect the loan by making sure the deal will work regardless of one link in the chain breaking.  If you can still do work and earn a few extra bucks, that's fine too.  The HM lender doesn't care: he/she just needs to know the scope of work and costs are reasonable so that if for whatever reason you can't do it he can recover the property and either finish the project or sell to get the loan $$$ back + the profit margin promised.

@Ladd Krestan you are correct that most lender's will want to see numbers based on a contractor doing the work.  There are two reasons for this.

1. If you aren't able to do the work for any reason, you will need to hire someone and they aren't going to do the work without labor figured in.

2. If you default on the loan for any reason and the lender has to take the property back unfinished, they will need to hire a contractor to finish the work.

Hopefully that helps.