Updated over 6 years ago on . Most recent reply
Hard money lending for rehab
Hello all!! I am going to be closing on my first investment multi family housing and was curious has anyone done hard money lending for a rehab? I want to fix the property up and refinance this, live for a year and then get another one. I have the equity once it's fixed up because I got a good deal on this property. I have never used HML before and does scare me but I am curious from those with experience with this and what are the thoughts of everyone on here regarding this...... Thank you!
Most Popular Reply
@Mark Leclair, hi and welcome.
Not sure why you're considering HML vs. an owner-occupant loan if you'll be living there? Rates are better and stable with conventional or FHA. Unless this is more than a 4-unit, it's a total disaster or your credit is trash, a deal like that should qualify.
My take on HML is it is best suited for those who are very good at buying places for at least 30% below market value "as is", can estimate repair costs fairly accurately, can determine fair market value after repairs, and are fast at getting the job done. You need to buy below market to ensure your lender is comfy with equity in case you fail to complete the rehab for whatever reason, accuracy with repair costs and value so you can refi the entire amount, and you need speed because high interest rates and late payoffs can eat you alive.
If you've never done a rehab of this scope before, I recommend finding investment partners/private money that isn't as costly or demanding on your profit margin as HML.
By the way, I don't know why you're scared of HML other than it's higher costs and shorter turn around time, but maybe it helps to know that most HMLs are simply Ma or Pa business people who have money to invest and like making loans that are backed by a "hard" asset such as a house. They aren't going to send Guido after you to break your legs if you don't pay up by Friday. Worst case is they'll sue in court....