Closing Cost for Hard Money Loan

[David H.]

Hello BP 

My name is David I am a new investor and currently in the market looking for my second deal. First deal was a two family house hack using FHA. This deal we are looking for a distressed property and plan to use hard money for purchase and rehab. I know lenders usually want 10% of purchase price but does that include the closing cost or is it separate? We prefer small multi-family and use BRRRR strategy but we will do a fix and flip if the numbers make sense. Does it matter to hard money lenders if we buy/hold or fix/flip? Or do they just care about 65% ARV to fund the deal?

[Tom S.]

@David H.   Closing costs would generally be separate from the downpayment, and most lenders I've spoken to require 20% down.  In addition, you generally have to "front" the rehab costs and get reimbursed per a draw schedule.  Finally they want you to have reserves so you can finish the project in case it goes over budget.

The last deal I purchased for $50k and did $25k rehab, and I needed $10k down, $10k to start rehab, and $10k in reserves.

Depends on the lender, but that's been my experience.  

Regarding buy/hold, most HML is short term only. You'd have to refinance if you're planning to hold it.