Would you recommend a someone new to Real Estate to use a hard money lender for their first purchase ?
I would not recommend using Hard money on your first deals. Its very expensive and can put you negative real quick if you do not get in and out of the project fast. You really need to know exactly what your doing and have a lot of experience rehabbing houses. Most people underestimate the costs, time it will take and the ARV.
Before attempting to use HM make sure to educate yourself on the business, the market, rehab costs in your area etc. Its not a difficult business but theres a lot more to it than it looks and a lot you need to know if you are just starting out.
@Guifre Mora long term I would like to buy and hold MF.. but to start I was wondering if getting a HML to do a flip or two and then buy and hold MF.
Most fix and flip investors use hard money loans or fix and flip loans. All the same. Fix and flip will require little more underwriting and hard money are a little more lenient with UW. All fix and flip investors sell or refinance to long term hold with various types of loans and lenders.
@Guifre Mora perfect, I've been focusing so much on MF and trying to start in that route that i can't say I've dedicated the same amount of time to flipping bc it wasn't in my initial plan. However, I have been considering it more now and I've heard mixed reviews about HML.
@Guifre Mora perfect, I've been focusing so much on MF and trying to start in that route that i can't say I've dedicated the same amount of time to flipping bc it wasn't in my initial plan. However, I have been considering it more now and I've heard mixed reviews about HML.
HML has its space in the lending world. I have clients that the only way they finance their fix and flip business is with HML. Quick in and quick out not a lot of questions asked from the lender. Even for emergency situations, I have help borrowers get quick cashout from their equity.
@Guifre Mora Interesting sounds beneficial is used correctly, typically what is required by HML? You mentioned earlier there's a little more to the UW, how so?
@Guifre Mora Interesting sounds beneficial is used correctly, typically what is required by HML? You mentioned earlier there's a little more to the UW, how so?
It depends on the deal if the property pans out the UW is done based on the property in question. The sweet spot for a trait HML is 30% down plus closing costs, but there are lots of ways to finance a flip with different LTV's. It's hard to put it all in one box. There is a lender for everything (almost)
@Guifre Mora and from your experience how is the interest paid out for the most part.. of it something that can be agreed upon or that’s strictly up front? Have you seen it where the parties would agree to let’s say 10% return on investment or is it strictly interest?
@Guifre Mora and from your experience how is the interest paid out for the most part.. of it something that can be agreed upon or that’s strictly up front? Have you seen it where the parties would agree to let’s say 10% return on investment or is it strictly interest?
HML is an interest-only paid monthly and a balloon payment on the principal when you exit.
@Julio Velazquez just make sure you know the details of your agreement with the lender and what you're looking at in costs and how it relates to your profits.
Would you recommend a someone new to Real Estate to use a hard money lender for their first purchase ?
I would not recommend using Hard money on your first deals. Its very expensive and can put you negative real quick if you do not get in and out of the project fast. You really need to know exactly what your doing and have a lot of experience rehabbing houses. Most people underestimate the costs, time it will take and the ARV.
Before attempting to use HM make sure to educate yourself on the business, the market, rehab costs in your area etc. Its not a difficult business but theres a lot more to it than it looks and a lot you need to know if you are just starting out.
@Greg Dickerson That's why I asked. Bc I've heard HML can be difficult., but that's what I had I'm mind honestly. I understand people always make it sound easy. But the truth is there is little things that go into it. I've done research on the market but want to do more boots on the ground research.
@Julio Velazquez no underwriting is just checking through the info you provide and make sure everything fits the lender's loan guidelines. It usually happens concurrently with appraisals. Julio you can always find someone who will tell you not to use hard money or not to use other people's money or not to go through a bank. If you can find a property that you can get rehab funds from a bank go for it. It doesn't usually happen. If you have someone willing to fund your very first rehab and doesn't care if you potentially lose all their money go ahead. The way I see it hard money is for new investors if they are serious about getting into the industry. As you get more successful other avenues of funding open up and many transitions out of it.
@Odie Ayaga Thank you thats really reassuring, I want to start and figured that would be a great place to start. I understand that too the fact that everyone will always tell or have a specific view on a topic bc maybe it didn’t work out for them.. I am serious about investing, long term I want to buy and hold small apartment complex 10-30 units.. but like you said the funding for that can come later after I started investing.
@Odie Ayaga just to clarify the under writing isn’t part of the numbers for the deal itself? I’ve heard so many different things in regards to the. Analyzing the deal and under writing is the same I’ve heard it’s not..
So there's you and there's the deal. A hard money lender can get all the information on you on file before you find a deal regarding your credit score, driver's license, track record etc. Once you find a deal and are under contract you'll supply your rehab costs and draw schedule, property info and from there you will move into underwriting (same with any bank). They'll order an appraisal and they'll check on all your information, background check, credit check, etc and make sure they can lend to you.
@Julio Velazquez I have used it for my first flip and for my first buy and hold, which is a brrrr. Be careful of the term length and interest. Make sure you have an exit strategy lined up, and make sure to vet the lender.