Hard money/private money loan to buy second flip

[Bryant Blackwelder]

Hey Hey guys! I’m back for more wisdom and guidance!!

Okay so I close on my first fix and flip in 8 days, and I met a guy who asked me if he could have my business card because he’s having a hard time finding contractors because he flips also.

So I start talking to him about me moving to East Tennessee and already in contract with my first flip and he said he works with hard money and private money lenders and can get me a loan for the rehab part of the flip! My mind was blown because I wasn’t excepting to find someone that does hard money before I moved. They do business in 40 states, and so I wonder is this a smart move so I don’t have to use all of my capital?

And also could it be possible to purchase another home that I found on MLS for $140k, rehab 30k-40k and comps at $350k.

Could I use the loan for this new potential house and the rehab and a part of it for the first flip and then I would put up any remaining for either homes?!

Just wanting to jump start on a good way! What do you guys think?!?

Good idea bad idea?

Is this possible as this would be my first time dealing with hard money or private money loans.

Also he said with great credit my interest rate would be between 5-8% over the course of 24 months.

Thank you all and you guys are awesome!

[Evan Polaski]

@Bryant Blackwelder, I feel like there is a catch.  I have excellent credit and a track record flipping and when I worked with all hard money lenders, the rates were 10-12% for a 12 month loan.  Not to say this guy isn't legit, but as Nathan mentioned, do some homework and make sure you know all the terms of the loans, and maybe ask for some referrals.  You will want to understand any loan fees, estimate cost to close, prepayment terms, what needs prepaid, what the draw schedule and fees are, reserve requirements, etc.  I would also ask what the process is to submit your draws.  Some may want you to pay the contractor and the lender reimburses you.  Others will cut checks directly to contractors, or cut checks to you prior to paying contractors, to be used to pay contractors.  What documentation is needed to submit a draw.  Is interest charged on whole amount, including proceeds in escrow, or only on what is drawn?

Hard money loans are a great way to get into real estate with less money.  The best return I ever had on a flip was with a hard money loan.  The only loss I ever saw was with a hard money loan.  If budgets go over (they will), if timelines run long (they will), you have interest expense that would not otherwise be there, compounding the stress of getting the property completed and sold.