hard money question

[Scott Walker]

I am just getting in REI and I am thinking about buying a rental house from a wholesaler. People tell me to get a loan from a hard money lender for quick money. Now if i got that loan would i try to refinance with a bank after the closing to get a lower interest rate or would I continue to pay off the loan to the hard money lender.

[Justin Pierce]

If you have time to go through the process with a bank, you have good credit, and the home doesn't need real extensive rehab I would say go straight to the bank. No sense in having the additional refi expenses if your upfront startegy is to hold onto the property.

If you need to barrow the fix up money, or the home is such a dog that a bank will run screeming, or you need to close real fast on the home and don't have 30-45 days to go through the bank or conventional lender process then go to the Hard Money lender.

Just expext that the hard money lender will probably charge 12-18% interest and 4-8 points. If you're a new investor and don't have much money to put up then expect to be at the higher end of those ranges.

These are very loose recommendation. The final choice will come down to your exit strategy, the equity spread in the deal, and other business considerations that vary with every single deal.

My first recommendation would be to go to talk to a couple banks and a couple HM lenders. You might find the choice is made fore you.