hard money

[Arcinio Arauz]

I just want some help on understanding hard money. I need to borrow funds to use as a down on five free and clear homes. The owner will take 75K as a down for all five and carry the rest of paper. Values of all homes together is about 470K. So I call a private lender and they want me to give them 30K-35K in order for me to borrow their 75K. What part of hard money I'm I getting wrong? I don't have the funds, thus my reason for asking. If I had the 35K I may negotiate something different with owner. So simply put... I need to borrow money because I don't have any, yet their asking me to throw down $35k of which I don't have to use their 75K? Please school me on this.

[Ann Bellamy]

I can't tell from you post what the 30-35K consists of, but I'm guessing it is either partly your own skin in the game, or partly fees or a combination of both.

Here's the thing: you are asking for a lender to provide a second position mortgage and to make it worse, you are asking for them to provide all of it with you having no skin in the game.

I don't know any local hard money lenders who do second positions at all, and with you having none of your own money in the deal, it's virtually undoable from a hard money lender. Maybe your own friends and family, but that's about it.

Look around at all the short sales and foreclosures for the last 5+ years: all the second position mortgages on those homes either were wiped out by foreclosure of the first position, or were paid a pittance in a short sale.

So if you are lucky enough to find a hard money lender who would provide a second, you will pay through the nose: as evidenced by the terms they quoted you.