All Forum Posts by: Greg Clark

I'm looking to understand hard-money loans better and I'm hoping to get some help from the BP community.

Are most hard-money loans interest only?

For an interest-only loan, to calculate the cost, does the following look correct:

Principal = $100,000

APR = 10%

Loan duration = 4 months

Total cost = (($100,000 x 0.1)/12) x 4 = $3,333.33

And assuming that is correct (please let me know if it's not), how do you calculate non-interest-only loan costs? Is it amortized over the course of a set term? Or is it amortized at a longer term with a balloon payment after 1 year (or some other term)?

Example A:

Principal = $100,000

APR = 10%

Amortization term = 5 years

Balloon payment = due after 1 year

So on July 1st 2021 the remaining $83,773 is due?

Example B:

Principal = $100,000

APR = 10%

Term = 1 year

Are either of these examples correct, and if not, can you help me understand better?

Thanks in advance!

I'm looking to understand hard-money loans better and I'm hoping to get some help from the BP community.
Are most hard-money loans interest only?
For an interest-only loan, to calculate the cost, does the following look correct:
Principal = $100,000
APR = 10%
Loan duration = 4 months
Total cost = (($100,000 x 0.1)/12) x 4 = $3,333.33

And assuming that is correct (please let me know if it's not), how do you calculate non-interest-only loan costs? Is it amortized over the course of a set term? Or is it amortized at a longer term with a balloon payment after 1 year? 

From what I can tell, comps are needed for three reasons. The first is to make sure that a duplex will cash-flow after expenses (so you would check to make sure the proposed rent price is competitive for the area), the second is to make sure the sale price is competitive for the area, and the third is satisfy any bank financing requirements. 

I make these distinctions because I've seen reports here on BP of people being denied financing because there were no available comps for duplexes in the area even though the property was being sold at a great price as far as cash flow is concerned. 

While I can't do anything about the bank's requirements, I'd like to know what sort of comps hard-money lenders look for if there are no duplexes close by. Do they just want to see that the rent expectation is reasonable (since that's what a different investor would care about and would therefore determine the selling price)? Do they want to compare a duplex (2br/1bth per side) to a 4 bedroom SFR nearby?

Thanks in advance! 

Update: I called another lender and they said that there's no problem if I'm switching from self-employed to W-2 (though the contrary would perhaps be an issue). 

I switched from working as a web development contractor (1099) to an employee (W-2) about 4 months ago. I checked with a local lender who told me that despite making a decent salary, having a high credit score and no other debt, I won't qualify for a mortgage until I have at least 8 months at my current job. He specifically said that it was because I went from filing as 1099 to W-2. 

So is there some other type of loan that I might qualify for sooner? Or should I abandon the hope of getting a loan any time soon and adjust my strategy to only involve flipping for a while? 

Or could I perhaps adjust to the Brrrr strategy (Is it possible to refinance a home without 2 years of consistent work history?) 

Hoping someone else has been in this situation before and can provide some insight.

That makes sense. Thanks! 

I'm brand new to REI and I am wondering why an agent would want to work with me on homes that are priced in the $20k range. If they make 3% commission, but finding a $20k house takes about as much work as a $100k+ house, wouldn't they be discouraged from helping, or perhaps not be particularly helpful? It just seems like it would be in their best interest to spend their time elsewhere. I've read a lot of material and no one seems to have mentioned this. Or maybe they did and I missed it. Any insight would be greatly appreciated!