How to successfully use hard money lending to build a real estate portfolio?

[Jacob Casarez]

Looking for some thoughts on HML for building a RE portfolio. What are the best ways to use HML? And is it a solid option for Buy Rehab Rent Refinance strategy? Also if you have experiece doing so, a numerical step by step response will get you my vote -- Thanks BP, you rock!

[Chase Maher]

@Jacob Casarez I will try to answer your questions as best I can, and they are my professional opinion - not to be taken as the end all be all !

What are the best ways to use HML?

The best ways to use HM is when you have some cash, a private lender or your own equity in a property to secure the 20-30% needed to use HM available. HM is a great way to not drop all of your funds into one property, allowing you to buy more projects and in turn increase your profits. With the market getting tighter, many investors are turning towards quantity over quality. This can be a great choice, or a massive mistake. If you are experienced and have it down to a science (Disclaimer: There will ALWAYS be unexpected bumps in the road) you can tighten up your margins/ return. If you are new, and don't have a mentor, you may want to start with one project and then another before you start acquiring multiple in a short period. The best ways to use HM are short term investments i.e. fix n flips, construction loans and bridge loans. These allow you to either sell out or re-finance when the term is up. make sure you use a lender that has no pre-pay penalty.

And is it a solid option for Buy Rehab Rent Refinance strategy? 

YES, a very solid option. First, do your homework on the re-fi options. Make sure you have studied up on this and ALWAYS have another exit strategy ready in case something falls through. Make sure your HML is aware of your intentions before funding the deals. I have heard so many horror stories of borrowers getting stuck in a deal with a HML that had bad intentions from day 1. You want to do this re-fi around 6 months to avoid more points and interest payments, so make sure your rehab can be done in time.

Hope this helps. If you have any questions or want another opinion on a deal feel free to contact me!