Hard Money Lender in New Jersey, around Essex County

5 Replies

I have noticed that buyers with cash have an advantage when buying real estate and can close faster and get better deals. Do you think it would be a good strategy to get cash from a hard money lender to get a good deal on a property...and then refinance with a bank. How long is it expected to take? How much do hard money lenders charge? Can you recommend any good ones?

For hard money lenders fees they range between 2 to 4 points and 70 to 80% ltv if long term financing. Rates are between 5.5% to 9% depends on dscr, credit score, and ltv. I hope I was able to help somewhat.

5.5% to 9% a year? I wouldn't want it for more than a year. Ideally once I purchase the property with cash I can refinance it within a 1-3 months. Will a hard money lender let me borrow money if I haven't bought a property yet? I understand that the bank will only finance up to 80% of the property value is that correct?

You have to have a deal lined up in order to get hard money or private money, they will send out their own appraiser, which you will usually pay for, and their own inspector, which you will also usually pay for. You will also have to present them with an accurate scope of work, which is basically a list of what work you are having done and how much it is all costing. Both hard and private money lenders will hold the rehab funds in escrow and, as the work is completed, the inspector will return to check that the appropriate work has been done. Funds will then be released to you. So, at times you may find yourself paying for certain things up front, like materials or a deposit on a job, and waiting to get reimbursed. You also have to find understanding contractors who are willing to wait an extra week to get paid, since it takes time to have the inspector come out, write and submit the report and for the lender to cut you a check. Some lenders want more down on the loan upfront but you don't have to make payments during the term of the loan; other lenders require less upfront but then expect monthly payments during the term. Typical term is 12 months, should be plenty of time to rehab, sell and pay back the loan. Some flippers who can afford to buy small properties with cash use Prosper and other crowdsourced lending to cover their rehab costs. I have used them a few times as a bridge when I needed down payment money or to pay a subcontractor without waiting for the escrow money.

My advice: start searching for deals, see what things go for in your area and what ARVs are (After Repair Value). Get recommendations on good contractors who will do rehabs. Read J Scott's Book on Flipping Houses. Listen to podcasts. Best of luck!

What you're talking about is a bridge loan (or a rehab loan, depending on whether or not the property needs work).  Definitely talk with the bank (that will do the refinance) first to understand your guidelines so you can prepare for the refinance.  If you don't understand the rules, you might be stuck with the property under hard money, which is not a situation you want to be in.

A conventional rate-and-term refinance doesn't require any seasoning; you'll be able to do it from day 1.  It will pay off the hard money lender, but you won't get your down payment money back.  If you want to recoup your cash, you'll have to wait 6 months for the cash-out refi.

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