What makes a deal attractive to Hard Money Private Money Lenders

[Steve Kirsch]

Hello All,

Can I have some pointers on what thresholds are typically required for ROI that HML/PML strive to achieve when reviewing and approving the lending for a deal? For me, I'm looking at cash flow and long term appreciation as my priority goals when running numbers. However, lenders don't bother with cash flow as they are looking at short term return of their investment in the lending of the funds. Each lender's ROI requirement is different which I fully understand and each use a number of formulas to determine approval. However, I would love to know if there are an industry standard threshold to be reached? This would allow me to vet properties more stringently before I submit data reports to the lenders?

Thank you

Steve K.

[Mark Safrin]

Originally posted by @Steve Kirsch:

Hello All,

Can I have some pointers on what thresholds are typically required for ROI that HML/PML strive to achieve when reviewing and approving the lending for a deal? For me, I'm looking at cash flow and long term appreciation as my priority goals when running numbers. However, lenders don't bother with cash flow as they are looking at short term return of their investment in the lending of the funds. Each lender's ROI requirement is different which I fully understand and each use a number of formulas to determine approval. However, I would love to know if there are an industry standard threshold to be reached? This would allow me to vet properties more stringently before I submit data reports to the lenders?

Thank you

Steve K.

 Well if you want to be within the comfort level of most of the HMLs I know of including us...

- Ask for decent a loan size. Some have a minimum of $75k for instance but $150k is usually good for most. $1M will probably never be turned away.

- Have a decent Mid FICO. 650 is good. 700 is even better

- If rehabbing, purchase a property with decent ARV compared to the property As Is value plus rehab. We like to lend you as much rehab as you need.

- Don't purchase too rural. That lonely mobile home in Outer Offthegridville might look like a good opportunity for a flip but many of us probably don't agree.

- Buy properties with lots of comps nearby if possible. That triplex, the only one sold for 3 years for 20 miles in all directions might be difficult to appraise.

- Many of us are uncomfortable with lending on commercial or mixed use property less than $500k.

Those are some that spring to mind.

Best wishes.