Hard Money Lending To Scale

[Arron Paulino]

I currently am working on finding private lending, but have found it easier to obtain hard money loans. They are more costly but have been more efficient in getting the ball rolling for my BRRRRs. After a while, do hard money lender terms get better as you continue to do business with them?

I am looking into scaling my portfolio by attempting fix and flips. I currently just buy and hold but would like to generate some side income and gain flipping experience. Looking forward to the responses!

[Doug Smith]

We own a licensed mortgage company, but we also have been prolific flippers and developers for more than a decade, so while I love it when someone borrows, I also realize the environment we are in right now does not lend itself to over-leveraging. When DSCR rates were sub-5%, you could really leverage. Now that they are in the mid-8%s, it's a different story. Regarding hard money, they rates might slightly improve for you as you gain experience, but not by much. I've seen this movie before and lived through multilple market downturns, including 2007-2008, and know that now isn't the time to over-leverage. With rising insurance rates and tax rates to go along with rising interest rates, I would highly recommend taking a measured approach. Higher loan-to-cost amounts were OK 24 months ago, but now it seems to make more sense to be more conservative and put more down. Be very careful...this is a time where you can both make a lot of money if you're smart, but you an lose a ton if you overextend.