Using hard money cross collateralized loan for flips

[Tia Rubadeau]

Hi everyone,

I was wondering if you would be kind enough to offer opinions on this plan?

I have a two properties that I own free and clear (one is my residence which is not yet eligible for HELOC as I purchased in January and was a rehab). The other is a large house that I am currently converting into a three family which is also not eligible for more traditional loan because it was recently given as inheritance (two years from date of acquisition is what banks have told me). I have found a hard money lender who would use the latter as collateral for a loan.

The specifics:

Hard money loan, cross collateralized, interest only for one year (16%)

There are two houses I would like to purchase (ideally one at a time, but seller wants to get rid of both and move out of state) are in great neighborhood, school district, etc. asking price of 40,000 for one and 60,000 for the other (my opinion is that he would take less -- 85,000 for both). Both need about 20,000 worth of work (my husband and I are experienced in doing all of it ourselves). Comparable houses are selling for about 100,000 for the smaller one and 150,000 for the larger and most aren't updated.

We should be able to sell these pretty easily and would have quite a bit of room to drop the price if needed.

A few things I was wondering..

Am I overlooking any major problems with this plan?

Has anyone done anything similar and what was your experience like?

Anything in particular I should look for in a HML? (They are local, do business with local investors and use local attorneys and from what I have read on bigger pockets the terms seemed comparable to other hard money loans)

Any suggestions or advice greatly appreciated : ) Thanks!