Hard Money Lending | How does it work?

[William Corcoran]

I fully realize that some HML will have different terms. But what are the basics?

I would like to make an Excel calculator to analyze deals, and I want to add the ability to estimate HML. What are the terms/rates, etc., that ya'll see in the DFW area?

I know BP has all sorts of calculators, but I prefer to personalize my own tools.

TIA

[Greg Downey]

Quote from @William Corcoran:

I fully realize that some HML will have different terms. But what are the basics?

I would like to make an Excel calculator to analyze deals, and I want to add the ability to estimate HML. What are the terms/rates, etc., that ya'll see in the DFW area?

I know BP has all sorts of calculators, but I prefer to personalize my own tools.

TIA

Rehab loans are largely based on experience and DSCR (long term) loans are largely based on FICO and LTV. If I were building a calculator, here is what I would use as place holders for each of those products:

Rehab loan - 85% of total project cost financed, not to exceed 70 % of ARV with a rate of 11% interest only and 2.5 points

DSCR - 75% of ARV with a rate of 8.25% 30-year fixed with 2 points

Notes on those loans: rehab loans can be more aggressive with leverage and rate BUT this should be a pretty safe placeholder. For DSCR, the big variable is the interest rate. That is the number I would use TODAY (11/3/2023) BUT the treasuries have decreased ~40bps in the last 3 days. You'd need to keep a pulse on that number a little bit more regularly. All of the other numbers should be pretty steady.