Private money/hard money loan

[Sara Enyart]

We have decided to use a private money/hard money loan for our next (2nd) flip. How does this work? Do we apply for the loan and then find a property? Or do we find a property and make an offer contingent on approval for the loan? The house we are currently considering making an offer on is “cash only.” So, if we have a contingency of loan approval, they might decline our offer. Do we just explain that it’s a private money loan which does not require an inspection? Thank you for your advice and words of wisdom!

[Caleb Jordan]

Originally posted by @Sara Enyart:

We have decided to use a private money/hard money loan for our next (2nd) flip. How does this work? Do we apply for the loan and then find a property? Or do we find a property and make an offer contingent on approval for the loan? The house we are currently considering making an offer on is “cash only.” So, if we have a contingency of loan approval, they might decline our offer. Do we just explain that it’s a private money loan which does not require an inspection? Thank you for your advice and words of wisdom!

 It is best to have a discussion with a lender and even try to get preapproved ahead of time. They can tell you what sort of terms and projects they would fund for you. Then when you find a deal run it by the lender.

You can explain to seller you are using hardmoney/private money. If you are using financing you don't have to have financing contigency. But if finacing falls through and you don't perform you lose earnest money in that case. I've seen contracts with clients using hard money come across my desk with and without finacing contingencies. Some want that protection and get finacing contingency tben others know waive it in order to make offer more attractive.