Would you accept this terms from a Hard Money Lender

[Sergio Sifuentes]

Hello BP, I'm trying to execute my first deal, It's going to be a flip and I was wondering whether this is a good deal or not. 

Assuming that the following numbers are correct:

ARV- $370K

Investor cost $ $245K

Rehab approx cost  $50K

Estimate Gross Profit $ 75K

Approx Net Profit $ 52K

Would you accept the following Hard Money Lender Terms: 

Interest Rate 14% and 3.5 Points

Origination fees 4%

Loan Term 6 months

Max Loan Valur 70%

Processing fee - $300

Underwriting fee - $245

Wire funding fee$25

Apprasial $450

Inspection $350

Insp Fee for Draws $174

I will highly appreciate your advice.

Thanks, 

Sergio.

[Dominic Lucarelli]

Everyone wants their first deal to be a flip. The lure of big money, all at once, is very sexy. I'm not saying you can't do this deal, but there are SO many mistakes that can be made that you might not even know you are making!

What will be your total costs to the lender?

Is your rehab budget enough/accurate?

How long will it take? What are your holding costs until it sells? How long do properties like this sit on the market until sold?

Do your renovations compete with other sold properties in the area?

Do you need permits/water testing/Flood insurance/mine subsidence insurance/[insert random unheard cost here]?

Do you KNOW enough yet to pull this off without making too many mistakes?

If you can answer that last question as YES, then by all means GO FOR IT. If not, I'd recommend trying to wholesell it for a quicker, smaller profit and learn from your buyer what's needed to make this deal work. You don't make much on the deal, but you don't risk it all on your first deal yet either...

Good luck, and keep us posted!