Funding For Flipping

73 Replies

I am not, but I have recently shopped some hard money lenders. They are all similar, but so far I haven't found one that I like their terms or process. I am skeptical about them, but I haven't used hard money lenders before. I don't mind the short term, but other than a fast approval, I don't see a big advantage over a portfolio loan or HELOC.

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Well these people are quite different.  Here is what is stated on their website, which is why I'm skeptical:

Perfect for real estate acquisition, rehab, marketing, holding and closing costs.
0% interest rate for up to 13 months
 Low monthly payments
$20,000 - $175,000 per corporate entity in unsecured business credit (from multiple lines)
NO documentation (income, tax returns, financials, assets)
NO fees upfront (out of pocket)
NO collateral required
Only reports to business credit profile and does not tie up personal credit
Approvals within 48 hours, funding within 2-3 weeks

@Anthony Dooley you should listen to the podcast they did with Ann Bellamy. She's a hard money lender and contributor here on BP. I don't remember the number, but it was one of the really early ones.

Anyway, the real point is that if you can qualify traditional financing, you probably shouldn't use a hard money lender. The exception to that would be if you needed to close quicker than you could get the conventional money, and you were going to refi yourself right out of the hard money loan. Or, you had a need to not tie up assets as collateral.

Hard money isn't for everyone. It depends on your strategy, your risk tolerance, etc. It's not a good model for Buy & Hold unless it's uber short-term strategic. But, it has it's place and serves a very important role for a lot of investors.

Thanks Hattie,

Yes, I can get conventional financing if I need to. Maybe that is why hard money doesn't sound that attractive to me. I would actually like to try it for a deal I have my eye on, but after shopping around a little, they don't seen any easier to deal with than a local bank. Closing fast is a plus, but if I have the property under contract, I don't need to be fast.

Originally posted by @Anthony Dooley:

They may just want all of your information to steal your identity. I don't know, but it sounds like bait. Watch out for the hook!

 Yeah. I have had a few that when I asked for information the first thing they ask me to do is send a copy of my driver's license to a gmail account. Yeah, I'll do that right away. 

Thank you, @Hattie Dizmond .

@Anthony Dooley if you can use conventional and have the time, you should probably do so.  The vast majority of my customers use hard money because the condition of the property won't qualify it for conventional.  There are so many old properties in MA and NH that most rehabs are not just fluff n buffs.  

If you judge hard money by comparing it to conventional for rates and terms, you will be shocked.  If you compare it to not getting financing any other way because of the property condition or giving away half of your profit to a partner, it can be the better option.

@Michelle M. this is simply business credit with a marketing slant toward real estate investing.  Frequently their fees are so high that they make hard money look cheap.  At least the business credit companies that I have checked into.

HI all, 

I would have to agree, Hard Money should be the last resort. It is certainly the most expensive. However sometimes other money is not avail due to property type/condition, need for a fast closing, or needing cash prior to purchasing ( Auctions). 

In my opinion, its better to make less money on a deal, then to lose the deal and make zero. 

Best of luck in all your ventures. 

Originally posted by @Anthony Dooley:

They may just want all of your information to steal your identity. I don't know, but it sounds like bait. Watch out for the hook!

 That thought came to my mind also.  I do recall a while back there was a real estate scam going on where the perpetrators bought property using someone else's identity.

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Originally posted by @Ann Bellamy:

@Michelle M. this is simply business credit with a marketing slant toward real estate investing.  Frequently their fees are so high that they make hard money look cheap.  At least the business credit companies that I have checked into.

That's pretty high!

@Ann Bellamy  

I have a question. I used a hard money lender on 3 different occassions back in the early 2000's and I was able to refinance out of the hard money loan as soon as the rehad was done (usually 45-60 days). These were buy and hold projects that fell into the category you mentioned earlier of being in too bad of shape to get conventional financing. So the extra money I paid in hard money was worthwhile because the equity I could build with the rehab.

Now I am looking at hard money option, but  can't pull the trigger because, from conversations I have had with loan officers at banks and mortgage companies, everyone is requiring me to wait 6 months before I refi. Can you give me an idea on how to get around this or point me towards a lender that does not require this 180 day seasoning. FYI: This is also the case for a property I bought cash.

Rod, I believe that is a Fannie/Freddie requirement for selling on the secondary market.    I'm not positive, because honestly, I know a lot about what I do, but very little about conventional lending.   Things have changed quite a bit since 2000.  

If that's the case, you have a few other options: buy in an LLC and find a local commercial lender who will refi you out for maybe a blanket loan on several properties, or rehab and hold 5 units and up.

If you find a commercial lender who will do a blanket, please stay in touch with me, because I am buying properties in the Augusta area and will be looking for one when I have a few properties accumulated.  I've sent you a colleague request.

@Rod Smith  back in the day we used to buy for cash and do the bellamy strategy, refi 3-6 with a commercial lender take the cash and repeat. 

Today we buy fix and sell exclusivly, but I know of two local portfolio lenders, (local banks with 3-10 branches, that will refinance rentals as soon as they are rehabbed, you have a tenant with a lease in place and if the property appraises, they will refinance immediately. 

I would check some of the smaller banks locally who do not sell all their loans, I suspect you will find someone. 

Ask for a senior loan officer, or commercial loan officer, or branch manager you need to find the loan officer who is not just doing typical residential loans, but one who is looking for business. 

Thanks @Dell Schlabach  ! I actually have a relationship with the local credit union, but they are saying 6 mos also. I will continue to try and find a good local back that may do it. I am sending you a friend request, I would like to talk more about flipping.

Hi @Michelle M. 

This thread has drifted a bit so I'm late to the party, but I saw their ad on FB and was intrigued.  I called them up. Below are a cut and paste of the notes for others searching the forums. 

global bank zero introductory rate in their personal name 50k-100k 1 fee on back end. 14 day approval you can spend money with in 72 hrs revolving line o credit

680+ credit scores unsecured 9% rate

contract granted amount, freeze credit scores and stack multiple lines of credit

Seed Capital rated with BBB

WCap financial

no collateral it’s a line of credit so it’s always there!!!

11 MO mark they roll over 0 percent interest rate.

Basically what they do is take out several lines of credit with 0% introductory rate, then you've got lots of up front money without interest. When the interest becomes due, tey'l just roll in into another 0% interest LOC for you.

I imagine what actually happens is that they sign you up or all your lines of credit and get their percentage, then don't help you on the back end to manage all these lines that are opened in your name.  IDK.  Anybody used them?

@David Briley

 When you say lines of credit do you simply mean credit cards.. I have never run into a true business line of credit that would give 0% interest .. the only place I have seen that is in the credit card industry.

0%  introductory rate  these are all credit card marketing terms at least in my mind.

and once you have 200k in credit card debt I wonder what happens to your fico then?

I suspect most folks could just hunt around for introductory cards.. the issue I see is the people that really should not be messing with this stuff get intrigued I E they have no saved up capital to get in the RE game they simply have a credit score.. now they go leverage their credit to their eyeballs and try to do their first deals... I see this as a recipe for disaster. I have enjoyed an unsecured LOC from many of my local banks for many years

But there is no introductory rate. you pay interest when you get the LOC... and you for certain have to qualify with more than Fico scored.. and actually the fico score is the least important its your tax returns and experience level not that a 580 has a chance in Hell anyway