Finding private money

[Dan Kim]

Hello BP community,

So I’ve lined up a great agent, contractor, and hard money lender. I’m having trouble finding private money lending specifically for that 20% down on the hard money loan. 
If my goal is OPM, just wondering if anyone has recommendations on how they found their private lenders. Thanks!

[Andrew Postell]

@Dan Kim a couple of things here:

1. HML w/Downpayment requirements - usually we don't work with these types of Hard Money Lenders (HMLs).  I mean, you can work with whomever you want to of course...but if I had to have 20% down on every property I purchased...I wouldn't have any properties.  The whole concept of these "alternative" strategies is to AVOID the 20% downpayment. 20% down is a traditional loan....or a DSCR loan. I can't do that, and that's why we buy off market, and why we use hard money. At least, that's why we use the HML that we use.

2. The deal itself - The math to this stuff isn't hard...but it is important to know. For example, most of what we base our decisions on is 75% of the ARV. We use that math because that's what the HML will lend us. So, if I found a property where I can BUY and REHAB at 75% of ARV...then my downpayment is $0!  That's what I want.  Is it realistic to be able to find deals with $0?  Probably not.  But if I do get lucky, I still want that chance.  What if I found a great property where I can BUY and REHAB at 80% of ARV....that's cool to me.  Now, I am coming out of pocket 5%. (oh, and don't forget closing costs).  I'm ok with that too.  But if I'm not ok...then I make my offer 5% less.  Now I can adjust my offer to fit the math. That might mean that I don't get the deal.  It's not my fault they are asking too much.  I can only do what I can do.  Alternatively though...if I find a property where I can BUY and REHAB at 100% of the ARV...well, that's not a deal.  I need to have that equity spread in the property.  I'm risking a lot when I do rehab.  I need the equity to hedge my bet.  I also need it because I can just go BUY a property off the MLS at 100% of the value...that will need no rehab - and no risk. But now I'm back to needing 20% down again. Which I can't do. I need the deal itself to be mathematically good.

I hope this makes sense how I am describing it.