Hard Money Lenders/Private Money lender for Newbies in Fix and Flip

[Gabrielle Gardiner]

Hi all! I am Gabrielle with A&G Moguls. We are beginners in the realm of property revitalization(fix and flip). We have taken paid courses and have some relationships with HML. We have a deal on the table, but we are trying to see our best options for funding. Private money lending seems better than HML due to the fees associated with HML. We would love to hear about both experiences from you all and also if you could suggest any good HML with good terms or PML with good terms that work with beginners with no experience and small cash reserve. We are located in Houston, Texas. Thanks!!!

[Mitch Smith]

Hi @Gabrielle Gardiner

Congrats on getting started. This is a great question. The easy quick answer is I would use private money lenders all day long. It is almost the only source that I use for all of my projects. Hard money lenders can be expensive and depending on who you use, there can be a lot of red tape when it comes to your renovation draws, etc. That being said, one of the advantages of a Hard Money Lender as a new Investor is you have an underwriting process that will help you vet a property. A Hard Money Lender will not loan on a project that does not make sense or is too risky for them. One of my favorite techniques when I was first getting started was using a Hard Money Lender for the purchase and using private money for the renovation. This insured my project would move along in a timely manner. My contractor is the engine that keeps my project moving down the track. My renovation funds are the fuel that keeps that engine going.

One recommendation I would have is to break down the holding costs of your project into a daily number. Once you truly understand how much that project is costing you every day, it will help you stay motivated to keep the project moving forward. I currently have a project that costs me $472 a day in holding costs. If I have a contractor that is dragging his feet or doesn't show up for a couple of days, its nearly $1000 that comes straight from profit.

I hope this helps. If you have any questions about building your team or a system, please feel free to reach out.

Mitch