How can you afford Hard Money Lenders?

Question

Hello,

Just wanted to get a discussion going on Hard Money Lenders. How can everyone afford them? There are great deals that pop up when it is only cash involved. However, once I calculate in hard money lender fees, points etc it squeezes the deal down from a home run to a single/double and if something goes wrong a loss.

Don't think I am willing to take that risk and work my butt off to making the lender his interest while they sit back do nothing and collect.

Thoughts?

Ryan Murdock · Answer

A single or double is better than sitting on the bench.  String a few of those together and you might not need hard money anymore.

Jeff S. · Answer

I respectfully disagree with any implication that some money (single or a double) is better than no money (sitting on the bench). The first time you have to bring cash to the table when you sell a deal that started out thin, you'll reconsider.

"However, once I calculate in hard money lender fees, points etc it squeezes the deal down from a home run to a single/double and if something goes wrong a loss."

Not trying to minimize, but loan costs are not even close to the highest expense when flipping a property. Your purchase price and construction costs will usually far exceed anything any HML will charge. Agent commissions are typically fourth highest after HML fees and also significant. Obviously, you want to minimize all expenses, but I suggest that if loan costs put you over the top in the aggregate, it was a lousy deal to begin with.

"Don't think I am willing to take that risk and work my butt off to making the lender his interest while they sit back do nothing and collect."

This is your real issue, isn't it?  I guess you think that the money HML's loan fell from the sky? Most I know work their asses off for many years to earn their money. Some then loan it on their own or invest it with an HML to loan for them. Money is a store of productivity from which others benefit, including you.  When you get to a position that you can loan the money you worked really hard for, and I hope you do, I'm sure you'll think differently, Ben.

Account Closed is right. Experienced flippers know to walk from a thin deal without the judgment. If your property can't comfortably support all the expenses associated with a flip, you're overpaying.

Account Closed · Answer

The flippers I lend to are making a good profit, even with hard money.  They are however very experienced and each has somewhat of a niche they work.  Maybe you should reconsider what you consider a deal.

George Despotopoulos · Answer

Hey Jeremy (great name reminds me of Vince Vaughn's character in Wedding Crashers)! I'll answer some of your above questions.

Difference between hard money lenders and traditional local bank? Hard money lender will fund up to 90% of acquisition and 100% of rehab costs, they'll lend to LLCs, they won't really care much about your credit score, and they'll fund within 5 business days. I've heard of local banks funding the same but it's pretty rare and hard to find.

No need to sell your soul. Hard money likes to see a track record. This doesn't only mean before and after photo. Organization goes a very long way. Do you have receipts, bills, invoices? Did you track your expenses in a spreadsheet? All very helpful.

Most hard money lenders won't care about your personal DTI. They will want to see that you have decent credit.

There are private lenders everywhere! There are 'private lending companies' that lend nationwide too.

Jeremy A. · Answer

I love to know why bp doesnt vett all the hard money lenders listed on this site?

I love to see line item example between avg hard money vs traditional local bank?

Love see what biggest differences between requirements of above lenders?

Are hard lenders easy to get approval or need sell your soul?

Are hard lenders care about profits of building over d2i and personal credit scores?

Any private lenders in Maine?

Thanks

Account Closed · Answer

People often don't talk about the boring deal they lost money on simply due to carrying costs. Even with your own cash, your risking opportunity cost. Flipping is higher risk, higher reward than rentals, doubt there is away around that regardless of your financial where with all.

Jeremy A. · Answer

Thx George d. Any you tried personally on deal?

How can you afford Hard Money Lenders?

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