Hard Money Vs. Prepayment Penalty
I have a bid on a property I plan to rehab and then sell. So turn around time is expected to be short. My choices are a hard money lender and paying the high points and rates. Or, is there any reason I can’t use a conventional loan and pay the prepayment penalty of 5% (for this particular lender) which will be considerably less than the costs of a hard money lender?
My mortgage broker says this lender will lend on appraised value rather than purchase price. I am buying the property at about 75% of as-is appraised value. We are dealing with fairly low figures (bid was $29,500) and I can finance most of the rehab myself. The after-repair value makes this a very attractive deal.
Would using the conventional lender and paying the prepayment be a sound plan? All you experienced rehabbers see any problems with it?
Thanks for your input!
seems to me with such low numbers, I would use conventional financing. I would also consider bringing in a money partner and then you would not have to worry about prepayment penalty.....
Prosperous investing,
td
pserber,
OR...maybe use YOUR cash advance lines on Your CreditCards...
I have done this on LowerPricedREIs
....as always,
GoodInvesting, Rocky
pserber,
If time is not a factor then go the cheaper way.
it probably depends on your projected holding time,
Thank you for all the great advice. It confirms what I was thinking. As 200Rock suggested, I was considering using cash advances in addition to the conventional loan. Having a money partner or two is something I will look for in future rehabs.
My holding time is expected to be relatively short (famous last words). We will start marketing shortly after we begin rehabbing.
Paula
Make sure how much you can get from your card in the form of cash advances. It may only be about half of the available credit.