Hard Money lending pros and cons

[Amit Barman]

In my previous flips, I went with private investors, But thinking of going all by myself this time with hard money lender. One of them already pre-qualified me, and I am looking at a deal right now, but I would like to hear from the experienced flippers about the pros and cons of hard money lending, other than the High interest rate. Going with the investor, I had to go for 60-40 profit split(60 being his), I figured, going with the hard money lender, interest rate will be cheaper than 60% profit share.

Comments, advise?

Thank you so much!

[Jeff S.]

Run the numbers, Amit. As expensive as hard money is, you will almost always come out ahead by borrowing than partnering. The drawback of course, is that you might have to put up more cash. The more experience you get, the more an HML might be willing to lend. After a while you’ll hopefully be able to find private parties willing to loan all or most of your deals at significantly lower rates.

Why don’t you speak to your (former?) partner, tell him your intentions, and ask if he would be interested in loaning to you instead of partnering. The benefit here is that you’re a known entity and have the proven relationship. What better place is there to start?

Jeff