So currently I own 9 properties. 4 here in the The Dallas, TX area where I live, and 5 in the Dominican Republic. Out of all these properties, I’ve flipped 2 of them and held unto them. I’ve managed to acquire a personal line of credit for $40k. I’m considering on using either a hard money lender to cover the purchase and repairs, and my line of credit paying for the downpayment and the monthly interest for the hard money lender. I also have a private money lender, but they would take longer to fund. So my question is, would it be wise to pull the trigger on finding the deal and going forward with it, and if so, which route should I take, the hard money lender or private lender route? (Of course considering that the private lender is going to be less expensive to borrow from)
If you are active, I'd look at doing a project with your Private Money they can fully fund and use HM for the current deal. It isn't great for your PM lender to be in second position with rates that are based off Private 1st position. As a borrower, you always want to take care of your lender, particularly your Private Lenders. They are like your water source.
I would say that depends. What's your next move after? What are your plans? How much is your private lender good for? What's the cost of the deal? There's a lot of factors that make it impossible to say based on what you've provided. I'd focus more on the details of the options available to me and deploying them to best suit my needs. Telling you to go private money without knowing further details wouldn't make sense if we find out later that you need to close in 10 days and they can't perform to that timeline or that you missed out on another deal because you went hard money and it ended up costing you liquidity.
My private lender would be good for up to $150k, the cost of the deal would need to fit within my criteria (which is $100 cash flow min, 12% cash on cash return, 15% IRR off total cost, and if it was a flip, at least $20k profit) and if I went that route, after doing a BRRRR method, I'd have to provide them up to a 10% ROI. I would also be looking for a deal where I would pay up to 75% of ARV, only for the BRRRR method. If I decided to flip it, I'm looking for a minimum of $20k profits, unless it was a fully funded flip, I would then provide them up to 50% of the profits.
@John Penzo oh, yikes, ok, now I see why you are asking. Your private lender cannot even cover the amount you need. I have used a combination of Hard Money and Private Money on several properties. If your private money is ok being in the 2nd position then use them for part of the money if their fees/rates are significantly lower. If they aren't, or aren't willing to be in 2nd position then just use HM for the entire thing. Less out of pocket for you that way.
If you are active, I'd look at doing a project with your Private Money they can fully fund and use HM for the current deal. It isn't great for your PM lender to be in second position with rates that are based off Private 1st position. As a borrower, you always want to take care of your lender, particularly your Private Lenders. They are like your water source.
Based on your numbers, your PL can't swing the entire deal on their own. If it's truly a good deal, use HML to do it. The deal should be able to support paying the added cost and still leave you with a healthy profit. Your HML should be able to tell you whether or not they like the deal quickly. Find one that is reasonable with their costs and save you PL for another deal.
If you save your PL for another deal, you need to go out and find one. Leaving your PL's hanging for too long will give them the desire to go work with someone else if a good deal comes along. Can't tell you how many times I've seen a borrower drag their feet and lose their PL to another investor because they weren't able to keep their PL's money invested for them. Every day their money is not deployed, it's losing money. You have to watch out for their pocket or you'll lose them.