What's a current typical hard money rate?

Question

I've got a deal I'm under contract for with a hard money lender providing 12% annual and 3pts on up to 75% of ARV. This sounded like a standard rate so I was going to apply. Just curious if this is agreeable. Any gotcha's I should be concerned with? I plan to take 150k out for a flip that hopefully should sell in 3 months. Located in Nashville TN.

Account Closed · Answer

What you need to know before hand is that the ARV is fluid. It is whatever *they* think the property is worth. And I can assure you that you are more optimistic about ARV than they are. It's not uncommon for a HML to claim only 80% of your ARV as Their ARV. For instance, Your research shows it is worth $200k and you want 75% of ARV, they then decide that "true ARV" is $160K and offer you 75% of $160k. So, ask them how they determine what they will lend before you make your plans.Never give money up front to get a loan from a HML. Another thing to be careful of are their "junk fees", that can be substantial and varies hugely from one HML to another. Ask for a list and cost of each closing cost beforehand.Ability to close is essential. If they are using their own funds and are liquid, they can move rather quickly. If they have to wait for another project to pay off, you could be delayed by weeks. And the most annoying is the "broker" who leads you on to believe he is funding the project himself (technically he might be) but has to go out and find funding to fund the loan. Meanwhile you are twiddling your thumbs waiting to see if this guy can actually perform.Another problem can come in with their contract. What happens if everything goes wrong, you get it on the market late, the market cools, the property won't sell and the balloon is due? Many times the HML will wind up with the remodeled house on the fix & flip investor's dime. You lose the property if you can't find a way to pay off the HML. Have a backup exit strategy. As to the interest and points, I can get 12% (and lower) with No points all day long locally, but some of that is because I've been at this for a number of years and I can show projects I've done from start to finish along with the profits made. Your mileage may vary.

Russell Brazil · Answer

Its in the right ballpark. Could be as low as a point and 8%, but for a lower risk loan. Someone with assets or a low ltv loan. Often the more you do repeat business, the better the terms will be as the risk to the lender goes down with your track record.

Eric Jacobs · Answer

I lend HM and represent quite a few HML and @Greg Downey is exactly right. Account Closed I'm not sure where you are borrowing but it is a rare occasion that you will see HML lend without points up front because someone has to get paid on the deal. The only way that may happen is if you are borrowing from a family office or mom and pop lender. If you can get it, Great but I would not advise anyone to refuse to work with an HML that charges points or you will deal with a much smaller universe of HML. As for the 12/3 for a deal that small, it makes sense though you may be able to shave one point. There should also be no junk fees because you should be getting a term sheet out of the gate where you can confirm what you are or are not being charged. Finally, ARV is tricky but all things being equal, 75 is a pretty good ARV for HML. Good luck

Leland S. · Answer

Thanks folks, someone replied to me on here with 10% and 0 pts... just required a home appraisal. This time I don't have time for this. I do have good amount of liquid funds (half of project total) so I'm just asking for half. My experience is 1 flip and credit score is 800+.

Stephanie P. · Answer

Realistically, your 12/3 is pretty standard.I've seen as high as 15 and 3 points and as low as 10/3There's also money out there that doesn't require a credit score and goes off the current as is value for around 8.75 or so and about 5 points.

Bob Green · Answer

Hello Mike,HML rates are typically determined by your credit score, experience and liquidity. Could be in the high 6's all the way up to 12 depending on these factors.

Michele B. · Answer

For 150 k I would see around a 5.5 % with 5 points and a 7/25 arm with a 80 LTV.I have seen a lot of them at 12% though

Greg Downey · Answer

Typical starting place for the HM guys that we are working with are 10&2. I agree that 8/1 exists (even better sometimes) but that is typically reserved for experienced borrowers.