Hard Money Lending Questions

[Joshua Hoffman]

I'm new to the game and have some questions around Hard Money Lending. I am considering using the BRRRR method to get started in real estate investing. Is utilizing Hard Money Lending specifically with this type of process a good decision? I am basing my thoughts around not having a lot of cash reserves(enough to do a conventional loan) and also the reality that most conventional lenders will not loan for flips/major rehabs ie roofs, HVAC, CapEx. How hard is it to find a hard money lender willing to lend to a "newbie"? I've done my research and know the exit strategies I would use but is it worth it? What does a typical "closing" look like with HML vs conventional? Thank you in advance for any information.

[Jody Sperling]

You shouldn't have any trouble finding a hard money lender who will lend to you, and you need to keep a few things in mind:

(1) The less experience you have, the higher the rates and points will be from the lender meaning (1.5) your first deal has to be superb. 

(2) Most, if not all, hard money lenders still expect you to come to the table with cash of your own. Skin in the game makes their investment safer and helps establish trust, so expect to pay something.

(3) Using hard money for buy-and-hold requires a small amount of luck and a larger amount of planning because (3.5) you need to find a bank that is willing to refi on short terms with a newer investor like you [i.e. planning], (3.75) you need work on a tight timeframe and trust that the random appraiser you land will value the property in line with your research and area comps [i.e. luck and planning combined]. Otherwise you can get stuck with not enough money to pay back the hard money loan.

There's more, but this should help you frame up a good starting place. Best of luck to you!