Hard Money Loans for Acquisitions

[Najeh Davenport]

I understand the concept of hard money loans, but I'm currently navigating the process of applying for one myself. The lender plans to finance 80% of the purchase price and 100% of the renovations for my property, which is approximately 3000 square feet, renovation loan amount of around $50,000. However, I encountered a hurdle in the form of a scope of work requirement. Despite providing a detailed bid from my contractor, I was informed that it wasn't comprehensive enough. After revising the bid to include one-liners detailing the work and materials, I'm now awaiting further feedback. Has anyone else experienced a similar process when applying for a hard money loan? Any insights or advice would be appreciated.

[Erik Estrada]

Each hard money lender has a different requirement when it comes to submitting a SOW. But generally lenders want to see the renovations outlined, costs, materials used, and specific descriptions (for example : install hardwood flooring for all bedrooms and living rooms). 

I am happy to share a form I use that helps alleviate the hassle along with a pdf outline

[Najeh Davenport]

I would greatly appreciate it 

[Ryan Stuckey]

Quote from @Najeh Davenport:

I understand the concept of hard money loans, but I'm currently navigating the process of applying for one myself. The lender plans to finance 80% of the purchase price and 100% of the renovations for my property, which is approximately 3000 square feet, renovation loan amount of around $50,000. However, I encountered a hurdle in the form of a scope of work requirement. Despite providing a detailed bid from my contractor, I was informed that it wasn't comprehensive enough. After revising the bid to include one-liners detailing the work and materials, I'm now awaiting further feedback. Has anyone else experienced a similar process when applying for a hard money loan? Any insights or advice would be appreciated.

On a purchase and rehab loan, it's in everybody's best interest to get an accurate rehab scope of work and therefore an accurate appraisal (when the appraiser can determine exactly what is going to go into the property instead of guessing). The borrower should definitely want a complete SOW to know very well what is going in the project and to enhance/support the appraised ARV as much as possible with detail. Without detail, appraisers will tend to assume low-medium quality of materials finishes and the like. The appraisal with an accurate SOW gives both lender and borrower a chance to withdraw from the project if the appraised ARV is not where it needs to be.

You should also put the SOW on the lender's template to help with underwriting and later draw requests so there is less to interpret/guess. At Longhorn Investments, we want borrowers to use our template with a certain level of detail needed so that we have a more efficient process for everybody, and that includes the borrower to get everything finished more quickly.

[Ryan Davies]

Depends on how large the lender is. The smaller ones know the market better and usually dont ask for as much. Most work this way BTW 

• Rates: 9% to 13% (Most Deals are 11-12%)
• Terms: up to 36 Months (Most Deals are 6-12 months)
• Fees: 2-4 points(%) of loan amount paid at closing (Most Deals are 3 points(%))
• Minimum Loan Amount: $50,000 (For loans less than $250,000 $2,500 minimum fee)
• Max Loan: 65%-70% of After Repair Value(ARV)
• 100% Rehab Financing Available (Require 20% of purchase price down payment or cross-collateral)
• Closing Timeframe: 48 Hours - 3 Weeks (Most Deals are 2 Weeks)
• NO PRIMARY RESIDENCES, NON-OWNER OCCUPIED ONLY, BUSINESS AND COMMERCIAL USE ONLY.