Could hard money for a buy & hold work ?

Question

I was just curious if people use hard money for buy & holds?

Terrence Evans · Answer

@Robert Collins Yes. You can use HML to buy then refi into a different loan

Dallas Sauer · Answer

Yes they do. It is typically referred to as soft money. Same limited documentation as a hard money loan but rates typically from 7-9%. We offer a 5 year term, up to 70% LTV. Currently we offer this program is Georgia, Colorado, Texas, Arizona, and are always willing to look at good scenarios in different states. Feel free to reach out to me if you would like to learn more.

Alec Granger · Answer

Hey Robert,

Hard money can definitely work for buy and holds. An example, we had a property that was a duplex in Union City in which it currently had tenants paying below market rent ($500 & $550) on month-to-month leases and market rent was $725 each side. Our price was $115k and to fix it up and bring it to market rent it would need 5k at most. I got an estimate from our loan officer over at Sherman Bridge for one of the investors I work with for their Rent36 loan which is a 36-month term. He would have to put about $40k down with a $79k loan and would cash flow around $700 per month at market rent. This particular program has a 6 month pre-payment penalty, but after that six months you can refinance out if you wanted. At market rent, the property would appraise for around 130-135k, so with good credit, you should be able to get an 80% LTV loan from a conventional lender which would would be about at 100k loan. This means you would be pocketing 20k from the property and your monthly payment would be reduced by about $100/month on a 30yr term. So when it is all said and done, you would be all in at 20k on the property cash flowing about $800/month.

Sorry for the lengthy response but I hoped this helped!

Kris L. · Answer

@Robert Collins

The only way I could possibly see that working would be if you have the ability to refinance out of the hard money, the sooner the better.  Seems like a riskier move to me, because if the refi gets delayed, that could hurt a lot more.

Christopher Brainard · Answer

No - hard money is far too expensive to keep long term and most hard money lenders only offer their loans for short periods of time (ie: six months or a year). If you can't get financing through a bank for a long term hold, you can always look into private investors. The rates will be higher than a bank, but nowhere near hard money rates.

-Christopher

Account Closed · Answer

@Robert Collins  I use a Florida Hardmoney lender that has an interest-rate @ 10.49. So if your refi gets delayed it’s not the end of the world.  Also if you have experience, the origination points can be as low as 2.24.

David Ripplinger · Answer

I'm surprised nobody else has mentioned this yet, but people have frequently used hard money to buy and hold if they use the BRRRR method. That way you're only paying high interest for maybe a few months, after which you can quickly pay off the hard money loan with the money you get from the cash out refinance. Obviously it's better to buy with your own cash or get a private lender when you can, but people have made it work with hard money when they have not had other options. You just have to be more certain you'll get a good appraisal to maximize your cash out refinance so you don't leave any money in the deal.

Ryan Swan · Answer

@Robert Collins using hard money for acquisition can work, as it allows you to be "almost" on par with a cash offer and close quickly. It may also allow you to purchase a property that would otherwise not qualify for conventional financing (non livable or in the middle of a renovation, etc)

As others have mentioned, however, hard money is much too expensive to carry long term for a buy and hold. You need an exit strategy from the HML after you stabilize the property, whether that be conventional financing or maybe borrowing from friends/family once you can show it's a solid rental property.

Syed H. · Answer

Yes you definitely can and many do. You just have to cash out refi as quick as you can.

John Thedford · Answer

Find a private lender (friend family etc) willing to help out. Most HML will be too expensive.

Could hard money for a buy & hold work ?

Most Popular Reply