Are hard money loans best for flips?

[Nick Broce]

Looking at starting my first flip. I have $23k saved up and am looking at houses in the range of 40-70k including rehab. I'm in Kansas city where the market is hot, so I figured the hard money loans are best for their speed. Am I right? What rates could I expect for a newbie investor?

[Bob Woelfel]

@Nick Broce...congrats on getting some cash saved up and putting yourself in a position to get started.  Hard money loans are a good option as most can close within 7-14 days once you get all the docs to them.  Rates vary depending on the experience of the borrower, cash reserves and the deal, but typical hard money rates for rehabs in KC are somewhere between 2-4 points and 11-15%.  Again, this depends on a lot of factors.  Once you have more experience and deals under your belt these will go down.

One thing to be aware of is that even in KC a 40-70k house is definitely on the lower end.  While there are some buyers for this product most of them are other investors and not homeowners, which might put a cap on what you can sell for.  Some lenders will also not want to lend on these low end flips as well.  You have enough of a cushion saved up to be looking at better neighborhoods.  Just my 2 cents.  Best of luck.