Any experience with HMLs for the purchase only?

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@Brian Rocha It’s clear why most lenders insist on including rehab funds in the loan, and all of our partner banks follow this practice for fix-and-flip loans to minimize risk and meet securitization standards. However, we are able to offer this type of financing internally with our own funds on a case-by-case basis, taking into account the borrower’s profile, the property’s condition, and the scope of work. @Brandon Croucier is giving you solid info on finding an experienced and honest mortgage broker who can shop your exact scenario both ways, with the rehab and without and break down the benefits of each with all fees so you can see an apples to apples comparison. Hope this helps!

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Makes perfect sense. Without getting into the nitty gritty, I am new to this, but I'm partnering with someone who is very experienced and has a dozen flips under their belt. Still not 100% on the route we'll take on our fist project together, but I like to know as much as I can regarding all of my options so I can make an educated decision. I'm ready to pay 10-20% and fully expect lenders to want some control over the rehab. Just trying to learn more about the process when its purchase only as I've seen that option on some lender sites.

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Hi Brian, the majority of hard money lenders want you to add the rehab money to the loan. This provides you protection and gives the lender a clear exit strategy,. When we order an appraisal, we are handing in a rehab budget to the appraiser and they will use this to help calculate an ARV which is used in the lending calculation. In most cases, the rehab money is interest free until you actually draw the money and if you never actually draw the funds, you won't owe the money when you go to pay off the loan. You will pay origination on the rehab money but that is the extent of it. Adding the rehab money is standard if the property needs repairs. The only time a you won't see the money added is when the property is considered stabilized. (not in need of repairs)

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Depends. We have done it both ways where we fund purchase and they cover rehab but if the individual is less experienced we do not do it that way, we have them put more money into the deal from the start and fund the draws, reason why is we also had a deal where the person said they would do this and never did anything and property sat and loan matured and it was a pain.Just recognize you will still not get 100% financing for the purchase, so you are putting money in up front.

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Hey Brian, Generally, a HML org will want to see some diligence around the contractor or get some idea of past work if you're doing the work yourself. But the draw request and fulfillment process really shouldn't be all that painful. Good HML's in ground up or rehab will provide a very easy/handy way to request and distribute draws using something like Built, which we use and it gives our borrowers and our team a single source of truth for all things draw-related. I would start asking questions about how the organizations you work with handle draws administratively and that should give you a good idea of how things will go.

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Totally get it, and if I were reading that prospectus it would be an interesting and moderately helpful footnote, but it wouldn't be the foundation of what we'd be considering.

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It does thank you all. I'm just getting back to the this forum after dealing with this fires out here in CA. Lots of great info on this thread, I think getting the rehab funds will be the way to go. Beginning to work on our SOW now.

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Hey @Brian Rocha I’ve been reading through your posts and responses—lots of great insights here! There are many ways to structure these deals, and in most cases, you can secure better terms by including the rehab costs in the loan. The good news is that you only pay interest on what you use—so if you don’t tap into those funds, you don’t pay for them. You have full flexibility to use none, some, or all of the rehab budget. If you have any questions, I’d be happy to discuss how we structure our loans to best fit each client’s needs. Every situation is unique, and we work with strategic partners to provide solutions for almost any scenario. Let’s connect!

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Hey Brian! I would love to connect and discuss different aspects of the Hard Money Lending process, Draw fees, etc. Everyone has made great points regarding higher leverage for having the rehab budget within your loan amount but it can be done without it as well. Curious as to the draw fee amounts you all have seen that have deterred you from wanting to pursue that method. Feel free to reach out or send a connect!

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@Brian Rocha -Something to note is lenders will oftentimes slightly limit leverage on the purchase of a hard money loan or a "fix and flip" loan if you are doing borrower funded rehab. Limiting leverage, for any loan ever = reducing lender exposure/risk. So, the common person may ask - well how is me funding the rehab myself any more risky for the lender/why would they want to limit leverage? The answer is that if the lender that's doing the hard money loan is only funding the purchase and not the rehab, they then have less oversight of the project since they're not doing the draws, and thus not seeing the progress of the project and having control of the funds or draws from the rehab to make sure the project is progressing. I know for example we can fund up to 90% of the purchase and 100% of the rehab when we're funding the purchase and the rehab. If we're funding just the purchase, we fund up to 82.5% of the purchase price. Hope this helps!