Hard Money - Lending Just for the Rehab?

Question

Hi. I am assuming that with REO's, I would put my offer in a better position if the money for purchase was all my own and not any kind of loan.

Do HML ever lend on just the rehab costs or must they all be in on the purchase costs?

J Scott · Answer

Hard money lenders (just like all lenders) like good credit, but if an HML can loan out against a property where there is a LOT of equity, it really doesn't matter the borrower's credit, as the lender can easily take back the property and resell for a profit if necessary.

Most lenders don't want to do this, but again, if there's enough equity that it would be *EASY* to sell for a profit, I can't imagine most would have any issues.

Absolutely.  Banks love contracts with no contingencies, and the financing contingency is a big one that banks are happy not to have to deal with...

Philip Bourdon · Answer

Thanks for the response, as I always take what you say seriously.

I would think so too, since my credit is in the process of being "rehabbed!"

Is it true that with REO's one's "position" is improved if it's a straight cash deal and no loans?

J Scott · Answer

I'm not a HML, but I can't imagine any HML would have an issue with you borrowing LESS money than what's needed for the purchase + rehab, especially if they're still secured in first position by the property.