Financing Using Hard Money or Private Lenders

[Samuel Iddings]

My partner and I are looking to purchase a property using a hard money lender or private money lender. Can anyone walk me through the “Loan to Refi Repay” process? What do the margins need to look like for it to be feasible? Do I need money to cover paying the lender back every month until the refi comes through? Does this process only work if the property needs to be flipped? How much do I get in the refinance?

[Daniel Molina]

@Samuel Iddings I would agree with what everyone is saying so far. You need to have a plan and see what works best with you. Every lender will have their own strengths and weaknesses but they should ultimately matter if it works with your planning. For example; you identify as a rental property investor. So let's assume you find a great house but the seller is only willing to accept cash or hard money because they need to close within 2 weeks or less. If the house is a good deal and you are comfortable with the rates your HML will offer then jump on it. If you feel the carry cost will eat too far into your profit then don't take the deal.

Regardless if you are flipping, buying turn-key rentals or do a BRRR Strategy you should always keep the following in mind:

• - Rate
• - Origination costs
• - Term (12 months, 24 months, 360 months, etc.) 
• - Pre-payment penalty or exit fees, if any
• - LTV/ARV financed
• - DSCR/cash-flow requirement

I would also encourage you to ask if they are a direct lender, typically deal/process flow and what happens if you need to extend the loan. This should give you all the costs you would need to account for deciding if using a specialized lender is right for you.