Hard Money Lenders - Chicken or the Egg

[Andrew Robbins]

Newbie from L.A. here. Trying to make first deal happen. I'm finding that any deal that is truly a deal is going to immediately have multiple offers. Though I have a substantial amount of cash ready to go, I'm still going to need HM to complete the deal. As I understand it, any HML is going to need a whole dossier before making a decision whether to lend me the money. Can I make an offer on a place without knowing if/when I'll get the HM? And isn't it going to take time for the HM to make a decision -- inspections, etc? What seller with multiple offers is going to wait around for that?

[Jason Krick]

@Andrew Robbins

I am still looking for my first deal, so take this with a grain of salt. I reached out to an HML regarding an FSBO I found. I explained myself and attached a detailed analysis of the property. It included purchase price, estimated rehabs, holding costs, closing costs for both transactions, and showed estimated profit. Another column showed analysis if I held the property for 6 months, refinanced and turned it into a rental. Finally, I showed numbers doing the same, but using a lease-option. He sent me an application packet and told me that it was the most thorough property analysis he ever saw, especially for a first-timer. He agreed to fund me. The terms aren't spectacular, but in reading these forums, it appears that it is rare for HML to fund a first-timer on his own. My initial terms are 6 points and 14%. There is a 6 month minimum (pre-payment penalty). My skin in the game is 10% of the purchase price. It can go to closing, inspections, whatever. Just 10%. He will lend up to 65% ARV. While this is expensive, I look at it like I just have to be patient. I have to find a deal and pay less than others. The cost of the money is factored in to the analysis. When I find a deal, I will contact him and send the numbers. He will verify and fund it. So, that's my situation. Hope it helps.