when you get a hard money loan for a house do you have to put anything down are is it just like a regular loan where they just give you the money and fix up the home and you can resale it for profit.
The best way to anser this question would be to work the formula:
Arv x 65% - Repairs - C/C/Cost - AF = MAO
a) Arv = after repaired value
b) Note that if an investor is using a Hard Money Lender for the first time then the Loan to Value(LTV) will be 50% and not 65% as projected in the above formula
c) Repairs – use the evaluation sheet
d) C/C/Cost = carrying and closing cost
e) AF = assignment fee
f) MAO = Max. Allowable offer
g) Even if you decide not to wholesale or flip properties this formula should still be considered when reviewing all your potential deals.
Now your question really depends on the price. If you negotiate the sale down low enough to where it fits into the formula then you will generally not need to come up with $$ out of your pocket at closing.
For example you find a house that you want to get under contract that has an ARV of $100,000 (I will use round #'s for ease of explination)
$47,000 would be all the $$ a Hard Money Lender (HML) will loan to you on this transaction. NOw if this is you first time doing business with them then the max they will generally offer you is closer to 50% of MAO. We did not even take into account points on the transaction.
If you are serious about working with a HML then I would contact one in your area and talk to them to see how they operate and get prequalified wiht one.
It is possible to get up to 75% of the after repair value. That's right! You CAN get $75,000 on a house selling for $65,000 IF and ONLY IF the ArV is going to be $100,000+.
Interest rate is HIGH (13+/- %), and points do apply. But, if you're sitting on a lot of equity and the turnover is fast, the interest rate doesn't matter.
For TCI folks: NO PREPAY PENALTY. You sell before month 1, and you just give the money back...No interest!
there are banks nationwide that will lend money just like a HML. Based on the ARV up to 90% on investment properties and 95% on owner-occupied properties. They will allow four loans per customer that is the only drawback. They would be good if your are keeping the properties to rent. I would not recommend them for flippers. The rates can not be beat. They are based just like a conventional loan. Actually some are Fannie Mae loans. So look at all of your options before putting all your eggs in one basket. I know this loan doesn't fit for the property you are describing but it's always good to know what's out there.
Why is allowing only 4 loans per customer a drawback?
And why wouldn't you recommend them for flippers?
Quote:
On 2004-02-24 23:07, tinman1755 wrote:
there are banks nationwide that will lend money just like a HML. Based on the ARV up to 90% on investment properties and 95% on owner-occupied properties. They will allow four loans per customer that is the only drawback. They would be good if your are keeping the properties to rent. I would not recommend them for flippers. The rates can not be beat. They are based just like a conventional loan. Actually some are Fannie Mae loans. So look at all of your options before putting all your eggs in one basket. I know this loan doesn't fit for the property you are describing but it's always good to know what's out there.
Scooter,
The best way to anser this question would be to work the formula:
Arv x 65% - Repairs - C/C/Cost - AF = MAO
a) Arv = after repaired value
b) Note that if an investor is using a Hard Money Lender for the first time then the Loan to Value(LTV) will be 50% and not 65% as projected in the above formula
c) Repairs – use the evaluation sheet
d) C/C/Cost = carrying and closing cost
e) AF = assignment fee
f) MAO = Max. Allowable offer
g) Even if you decide not to wholesale or flip properties this formula should still be considered when reviewing all your potential deals.
Now your question really depends on the price. If you negotiate the sale down low enough to where it fits into the formula then you will generally not need to come up with $$ out of your pocket at closing.
For example you find a house that you want to get under contract that has an ARV of $100,000 (I will use round #'s for ease of explination)
Arv x 65% - Repairs - C/C/Cost - AF = MAO
$100,00 X 65% - $15,000 - $1,000 - $2,000 = $47,000
$47,000 would be all the $$ a Hard Money Lender (HML) will loan to you on this transaction. NOw if this is you first time doing business with them then the max they will generally offer you is closer to 50% of MAO. We did not even take into account points on the transaction.
If you are serious about working with a HML then I would contact one in your area and talk to them to see how they operate and get prequalified wiht one.
HTH
Is it your experience that the HML will loan the amount to cover costs?
The repair amounts would be put in escrow
It is possible to get up to 75% of the after repair value. That's right! You CAN get $75,000 on a house selling for $65,000 IF and ONLY IF the ArV is going to be $100,000+.
Interest rate is HIGH (13+/- %), and points do apply. But, if you're sitting on a lot of equity and the turnover is fast, the interest rate doesn't matter.
For TCI folks: NO PREPAY PENALTY. You sell before month 1, and you just give the money back...No interest!
there are banks nationwide that will lend money just like a HML. Based on the ARV up to 90% on investment properties and 95% on owner-occupied properties. They will allow four loans per customer that is the only drawback. They would be good if your are keeping the properties to rent. I would not recommend them for flippers. The rates can not be beat. They are based just like a conventional loan. Actually some are Fannie Mae loans. So look at all of your options before putting all your eggs in one basket. I know this loan doesn't fit for the property you are describing but it's always good to know what's out there.
[addsig]
Why is allowing only 4 loans per customer a drawback?
And why wouldn't you recommend them for flippers?
Quote:
On 2004-02-24 23:07, tinman1755 wrote:
there are banks nationwide that will lend money just like a HML. Based on the ARV up to 90% on investment properties and 95% on owner-occupied properties. They will allow four loans per customer that is the only drawback. They would be good if your are keeping the properties to rent. I would not recommend them for flippers. The rates can not be beat. They are based just like a conventional loan. Actually some are Fannie Mae loans. So look at all of your options before putting all your eggs in one basket. I know this loan doesn't fit for the property you are describing but it's always good to know what's out there.
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After 4 loans, your credit score and/or income to debt ratio is usually tapped.
Flippers=fast=interest rate is not THAT much of a concern.
Rentals=time=find the LOWEST rate by all means to maximize your investment.