Investor · Miami, FL · Member since 2013 · 12 posts · 2 votes
Hello -
I’m looking to flip my first project which is in the Miami FL area.
I want to obtain funding for the purchase and use my own cash for the rehab, holding, and closing costs, etc.
The problem I have found with hard money lenders is that they will provide somewhere around 70% of the purchase value. I understand that they want the buyer to put some equity into the purchaseso they are “on the hook” as well. Which is understandable.
Question - if I’m wanting to hold on to my cash for the rehab and other holding costs, what’s the best way to make up that 30% to initially purchase the home?
Is it as simple as going to another hard money lender to obtain the remaining 30%? Is that even allowed and/or ethical?
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
6y
That is not going to happen as the 2nd HML would have 100% exposure
Think about it this way, being your first flip, you are the ultimate risk to the Lender as you just don't know what you don't know. Contrary to what you might read here, many flips go south and lose money
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
t's not an ethics thing, liens on houses don't happen in the dark and hard money lenders typically won't put a loan on a property that has a loan on it or allow a loan to come in in 2nd position. Why does your cash have to go towards the rehab instead of the down payment? Why would you rather get 70% of the purchase price, find some other means to fund the other 30% and pay 100% of the rehab out of pocket than get 70% of the purchase price, pay the 30% out of pocket, and have the HML pay 100% of the rehab?