Private - Hard Money

[Eric Odum]

I am curious what tactics your hard or private money lender uses to arrive at a value in which they are willing to loan.

Do they use a 3rd party appraiser?

Use 3rd party real estate agents for an opinion of value before repairs and after repairs?

Do they have internal staff to value?

and lastly, regarding repairs, I assume (please correct if different for you) the loaned funds designated for repairs are based on a draw system in which funds are dispersed based as certain tasks are completed. Is this how it is handled in your experience?

Thank you in advance.  

[Sean Blomquist]

Eric,

I can't speak for all HML's, but our process is as follows:

1. 3rd party appraiser to determine ARV

2. repair funds are released in draws, based on % of completion.  % released at closing to get you started (usually 25% of budget), then 25% draws at 33, 66, and 100% complete.  This could vary depending on the size of your rehab budget.  Larger budget = more draws with less % of completion.

Sean