Hard money loans based on ARV with smaller “down payment”

[Jesse Lynch]

Hi BP!

I've successfully flipped a couple houses partnering with my mom, but she is now retired finds herself too risk-adverse to use a HELOC as we did in the past, and truthfully she is quite content with her retirement financial situation.

Which leads me to now. I am at the early stages of my solo investing career, I have $10k for down payment, and have been preapproved for about $200k FHA (3,5% down) or $155k Conventional (5%) down.

I would really love to either flip to gain a bit more capital or use the BRRRR method, depending on the numbers, but I think my best chances in this market(Twin Cities, MN metro) will be to have a cash offer or hard money, as it seems the value add here comes from property distress, which isn't exactly FHA/conventional friendly.

As an example, are there hard money lenders in Minnesota that would lend $170k for purchase and rehab based on an ARV of $270k, if I only have $10k cash?

How does my cash come into play? Is there a traditional “money down” situation with hard money?

Thank you so much for any input!

Jesse

[Tim Swierczek]

@Jesse Lynch & @Chance Stein from my expierence most hard money lenders do want at least 10% of the purcahse price down and will lend on 70-75% of ARV, which means it would be possible in the above senerio if the price were 100K or less, and the rehab was 70K. The house would need a future value of 226,667 if at 75% or 242,857 at 70% which would work in the above senerio. The issue I would see is that you would then be tapped out with no reserves to pay for holding costs while the house is vacent and being worked on, or for cost overruns or for repairs. I strongly encourage you to partner with someone so you have a saftey net of at least 10K but preferably all closing costs, and then 2X of all expected holding costs.

Feel free to reach out if you want to discuss it further.