Are these good Hard Money Terms or what?

Question

I'm still new but I found these conditions when looking for a Lender in my area,  What do you think?

Rehab & Rent Loans – Available in MD & GAWe lend up to 90% of Acquisition, 100% of Rehab
Max 70% LTV
6-12 month loan term
12% interest only, paid monthly
5% origination fee, paid at closing
$150 per repair draw (if applicable)
$250 loan payoff fee to coordinate payoff with title attorney
No pre-payment penalty
No application fees, appraisal fees, underwriting fees

Should I move on it or is it something I should be concerned with?  Thanks.  #TeamTeam

Tom Spaeth · Answer

Depends on what you are doing. You have to look at the complete package of your deal.

6 months in generally to short. Give yourself 2 months to rehab and 2-3 months to sell and close. And you are up against a hard deadline. If your rehab stretched to 2 months your lender can get expensive real quick. And did you need plans and permits. In denver that can add 3-4 months to a project. You have to pay attention the cost to extend to loan.

12% is very reasonable. THe 5 points is on the high side. I always like to double the points and add that to the interest rate. Gives a general idea of the rate you are paying, So in your case approximately 22%.

Never paid an origination fee on top of the points. That takes you up to 32% rate for a 6 month project. Ouch.

I would look elsewhere. Bound to be alot of hard money lenders in your area shop around. If you have no experience the costs will be higher.

I would pay 10-12% plus 2-4 pnts no origination fee.

Depending on your project this deal is likely to put all of the profit in the lenders hands and none in yours.

Tom Spaeth · Answer

Another big issue you need to watch. Many hard money lenders expect you to fund construction as you go and then they periodically reimburse you. Not an issue if your GC understands this and is working with you and you pay for regular draws. A lot more difficult if your dealing with all the sub trades or a GC with no credit. Many times they want to be paid weekly. And you may not have the money to pay them.

From the lenders perspective they don't want to give you money until it is locked into the property via labor and material. Nothing worse than a borrower taking the cash and heading out of town.

Lamont Marable · Answer

@Tom Gunnison @Tom Spaeth @Curt Davis - Thanks Fellas!!

I'm going to pin these folks on the wall as an option but continue to shop around.

JUST came across this one.  Thoughts?

PROPERTY TYPE:

Commercial loans on 1 - 4 Family investor properties and small apartment buildings. Larger Commercial loans financed in our Commercial Hard Money Division.

LIEN POSITION:

First mortgage only.

STANDARD TERM:

6 months with monthly extensions up to 12 months.

ADVANCE RATE:

Up to 100% of the total project costs, subject to 65% of the After-Repaired-Value. Reserve account applies.

RENOVATIONFUNDS:

Renovation funds are usually advanced in one to three draws, and wired directly to your account. Rehab portion of the loan typically not to exceed 100% of acquisition cost unless otherwise approved.

CLOSING COSTS :

Up to $1200 of closing costs (i.e. title insurance, recording fees, etc.) can be financed as part of the loan proceeds.

GUARANTEE:

Personal guarantee required.

QUALIFYING DOCUMENTS :

Investor Assessment Form

LOAN DOCUMENTATION:(For Each Loan)

Purchase AgreementSummary of Rehab Work to be CompletedAfter-Repair-Value Appraisal (Obtained by Brookview)Tile Policy (Obtained by Brookview)Brookview Deal Submission FormPictures of Rehab PropertyHome Inspection3 months of Bank Statements2 years of Tax Returns3 Most Recent PaystubsSigned 4506-T

After-Repair-Value Appraisal (Obtained by Brookview)

Tile Policy (Obtained by Brookview)Brookview Deal Submission FormPictures of Rehab PropertyHome Inspection3 months of Bank Statements2 years of Tax Returns3 Most Recent PaystubsSigned 4506-T

Lamont Marable · Answer

One of these homes

Lamont Marable · Answer

Thanks Fellas!  I was planning to rehab and lease but did I overlook the down payment?  I was surprise to see no down payment of any sort.

My cash is currently limited to 8,000.  I was planning to buy the property from auction.com with my highest offer being 60,000 (it's currently at 25,000).  With rehab expenses of 20,000.  ***Side note - I'm so help that I've found a site that will help me with this***

Thanks Tom and Curt!

Tom Gunnison · Answer

I don't see an additional origination fee on top of the points being charged. I could've missed it.

I agree with @Tom Spaeth -- get a longer term. You'll almost definitely have to extend beyond 6 months. Once you do, your money really starts to get expensive although still likely cheaper than any equity partner you'd be able to bring on board.

90% acquisition and 100% rehab is outstanding if you can get it. Doesn't seem prudent from a lending standpoint (assuming you can actually achieve those ratios inside of a 70% LTV(aluation) in your market). But, get it if you can get it.

Good luck.

Curt Davis · Answer

It all seems ok except the $150 repair draw and $250 loan pay off fee.

Are these good Hard Money Terms or what?

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