I have called one hard money lender but the interest was high and so was the deposit. This would be my second investment and I understand it is risky when dealing with ppl just getting started. I don’t know where to look for hard money lenders and I want to look at all possible hard money loans out there before pulling the trigger.
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
7y
That's correct @Aaron Froggatt as to where the name comes from. @Courtney A Hall if you get out to meetings you can typically find some representatives from lenders. Many also sponsor events that you can attend
Investor · New Orleans, LA · Member since 2012 · 968 posts · 747 votes
7y
All hard money has a high interest rate, hence the name "hard money" as opposed to "easy money". Typical hard money loan is 10% interest or higher and 2 to 3 points. It is expensive. As far as down payment goes, they usually base it on your experience level, but the best I have seen for a HML is 10% down on purchase and they fund 100% of rehab.
All hard money has a high interest rate, hence the name "hard money" as opposed to "easy money". Typical hard money loan is 10% interest or higher and 2 to 3 points. It is expensive. As far as down payment goes, they usually base it on your experience level, but the best I have seen for a HML is 10% down on purchase and they fund 100% of rehab.
I was led to believe that the term "hard money" refers to fact that the loan is based on the value of "hard assets", in this case real estate, versus a borrower's creditworthiness or "soft assets" such as brand recognition.
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
7y
That's correct @Aaron Froggatt as to where the name comes from. @Courtney A Hall if you get out to meetings you can typically find some representatives from lenders. Many also sponsor events that you can attend
Investor · New Orleans, LA · Member since 2012 · 968 posts · 747 votes
7y
That is where the name comes from originally, but most hard money lenders don't operate that way these days. And some people say that the total interest is a lot to absorb which is why it is described as “hard money.”
I have applied with many and they all wanted the same info... income, credit score, bank balances, assets, liabilities, experience level, and most importantly info on the deal itself. The rates and terms vary based on those things. If you have less than stellar credit, little money in the bank and no assets, they can lend based mainly on the deal itself, but you will get the highest rates and least favorable terms. Think credit card type rates...
People are being led to believe that they don't need any money to invest in real estate, that they can get a hard money loan even with poor credit, no money in the bank and no assets. This is simply just not true. You need money to invest in anything. The term "investment" is defined as the action or process of investing money for profit or material result. The term "invest" is defined as to expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture. You need money to invest!
I think it is better for people to think of hard money, as a difficult and expensive source of funding. It should be used as a last resort only in my opinion. And yes, you typically do have to make monthly payments, and they are high, especially if you have little money down.
The majority of hard money lenders out there DO require a down payment. They’ll take a look at your credit score, experience, and maybe a few other factors, and then calculate your down payment from there. Most often, you’ll be required to front 20% to 30% of the deal. And it makes sense why they do this:
They’re taking a risk on you. They’re assuming that you’ll be able to pull off the flip and pay back the loan with interest within the timeframe they’ve established. When you pay 20% – 30% up front, it lowers their risk.
Each company has their own underwriting criteria to determine risk on a deal. If they see that you have experience and a good credit score, you’ll be able to pay less money up front, and get a more favorable rate and terms.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Courtney A Hall try MoFin lending out of NYC. I've used them for hard money. Reasonable rates and fees, nice guys to work with, and can go from short term hard money to long term financing if your strategy is BRRRR.
