how expensive is hard money?

[Devin Mann]

say they are offering 4 points with 12% interest on a hard money loan and they are offering 70% of arv.

this SFR is worth 300k ARV. Im purchasing it for 170k. Now how do the costs lay out? i pay those 4 points up front or at the end of closing? and how much would my interest only payments be?

i know its a dumb question, im just trying to figure out how much money i would need to get a hard money loan

[Nghi Le]

@Devin Mann

You didn't mention what the loan-to-cost (LTC) is, which is the cost of the acquisition price and rehab. In addition to LTV (which is usually based on ARV), hard money lenders lend up to 80%-95% LTC.

Some lenders will also roll the points into the loan (and paid at the end instead of upfront), but most prefer to have it paid up front.

Typically I recommend you set aside 20-30% of the total costs of the loan.  This would not only cover the down payment, but any closing costs, upfront points, prepaid insurance, etc.  Then lenders also want to see that you have at least 6 months of interest payments available in the bank, and some money to start the rehab.  Lenders will finance rehab, but it's done in reimbursements, so they will give you money in draws as the work gets completed.