Hey quick question about a rehab I'm planning! Are holding costs usually covered in the hard money loan for the rehab or is that an out of pocket expense similar to closing costs and refi?
@Ed Quinn the answer here is mostly no. Holding costs are utilities....those aren't covered by Hard Money Loan (HML). Payments to the HML....those usually are not covered. Insurance COULD be covered if the closing costs are included in your transaction. One of the important concepts to understand is what % of the property your HML will lend on. Let's assume that your HML will lend 75% of the After Repair Value (ARV) of the property. So if you could buy, rehab, and have your closing costs (including the insurance) all at 75% of the ARV or lower then you could include all of those costs. Now doing that might be pretty hard in this environment but the concept still works. But utilities is usually something that you would pay for out of your pocket. Hope all that makes sense.
Yeah, i follow. Thanks for the response!