Hard money clarity

[Account Closed]

Hey guys, so I'm very much green at RI and am still in he education/book reading process. I am almost done with "The Book on Flipping houses" and have two more books lined up after this on, found here on BP. I am going to be getting into flipping but have relatively little money to start and so I was interested in hard money loans, but still have yet to fin a couple specific answers to some questions I have. If any lenders could help me clarify that would be great. 1) I understand HM loans typically come with 10%-18% interest rates but what number is that based on? Total amount? So for instance a HM loan of 350k would tack on an additional 50k in interest? 2) if the lender also covers rehab cost, let's say 50k of rehab to a 350k purchase price would the additional interest be based on just the purchase price or both figures? Thanks to all who take the time to read my long lost!

[Tina Glover]

Jonathan - since you are in So Cal (as am I) you may want to check out Lending Home.  They are the only HM lender I have found so far that will lend to newbies like me and you.   Their rates range from 7-14% plus 2.5 points.   They will only finance 70% of the present/before rehab value of the home, and won't exceed 90% of the purchase price so you will have to have 10% down at least.  They determine the present and after repair value through a broker's price opinion, for which they charge $299.  If you find a house with a pretty good spread (very possible in Southern California if you find a good deal), it's doable.  And the goal is to only hold the loan for 3-4 months, resulting in a lot less interest than what you would pay if you held it for a year.  $350,000 x .14/3 = $16,333 that you would pay in interest if you held the property 4 months + another $8,750 for points.   I know, it's painful, but there are a lot  more expensive hard money lenders out there and at least you get your foot in the door.  I haven't actually used them yet - still trying to lock down my first flip (San Diego is VERY competitive), but they will be the first call I make when I get to that point (hopefully very soon).  Good luck!!