The Hard Money Process?

[Jason Deangelis]

Hey BP community! My partner and I have our first rental property underway and were able to finance the deal with our own capital. We are now in the beginning stages of exploring creative financing for further projects. We know what hard money is but would love some information on the process. Questions of how interest is paid (monthly or lump sum), is there a pay down schedule and is the interest only on the remaining balance. Anything informative about the process from start to finish or what to bring to the lender to secure the loan would be a huge help to us. We are in Chicago so if you are in the midwest and offer lending we would like to connect!

[Eric Johnson]

Jason, 

I am also in Chicago. Rehab loans are typically 80%-90% acquisition (depends on experience, 3 deals done in last 36 months is helpful to get increased leverage) & 100% construction. Construction funds are heldback at closing and are disbursed as borrowers complete work and request reimbursement.

They are 12mo interest only loans paid monthly. 9.25-10.00% (per annum) is a good rate to start with for estimations. Most transactions are 2-3 points. No prepayment penalty.

To get a loan, you will need prove you have a solid deal (the profit margin is great enough) & that you have enough cash to close.