Hard money lending investing

[Xavier Mc holder]

A Blog on BP gave the following example:

The after repaired value (ARV) of a potential property is $200,000 and you can purchase it for $100,000 and it needs $30,000 in repair costs. In addition you have to consider the following

$6,500 in closing transaction costs (state/county transfer/recordation tax, title insurance, title work, property insurance, taxes.. etc..(~5%)

$5,200 in lender fees, (~4%)

$7,800 for lender interest payments assuming a 6 month outstanding loan (~6%)

$2,600 in holding costs like electric, gas and water. (~2%)

All of these costs come to a total of $152,100 (including your purchase and rehab costs).

• Your costs will be about $13,000 for realtor fees (5%) and transfer taxes/title costs (1.5%).

My question is, Would the hard money lender lend the all in amount of $165,100 or would they only cover the Total purchase price and construction costs: which amount to $130,000? And do I need to have 13,000 cash reserved or can this come out of the 34,900 profit I would have? 

[Mindy Jensen]

@Xavier Mc holder , no. A hard money lender is not going to lend you 100% of the purchase price plus 100% of the closing costs and 100% of the repairs.

They might lend it to @Jay Hinrichs , because he's been doing this since God was a boy. He knows what he's doing and he has a proven track record. He probably has people falling over themselves to give him money.

If you are new to investing, you're going to have to have some of your own money in the deal. Think about it from the lender's point of view.

They've ponied up 100% of everything, and suddenly you discover a Huge Problem. (In a rehab, there is ALWAYS a Huge Problem.) You have zero invested in this, and you can simply walk away, leaving the lender holding the bag. (They don't want to be holding the bag.)

But if you have $35,000 in the property, that might be too much money for you to walk away from, and you stay and figure it out.