First time hard money loan advice

[Anthony Brancato]

This is the first time I will be using a hard money loan lender. I was hoping to get some thoughts on the proposal i received. Thank you! I’ve attached the ​​ loan proposal for you with a summary of the numbers below: purchase price: $ ​100,0 00 rehab amount: $ ​70,000 est. value(ARV): $ ​230,000 ​ (min value req'd for rehab budgeted) loan amount: $ ​153 ,000 monthly interest @ 12.99%: $1, ​656 down payment: $1 ​7 ,000 fees at closing est: $ ​11,3 00 (see proposal for details) escrows est: $ ​3 ,700 Est. cash to close: $ ​32,0 00 ​The closing costs and escrows can't be rolled into the loan so the est. $32,000 has to be paid out of pocket at closing, however the seller can contribute towards some/all of the closing costs. To approve the loan we will need to verify that you have $45,000 in total cash reserves, this is to insure you have at least 6 months of payments left in your account after closing. We do not defer the payments. In order to provide you with a proof of funds letter I just need the name of your business/LLC that will be purchasing the property. Thanks!​

[Jay Hinrichs]

@JR T. that's true of all HML and that's how HM lenders like myself make any money ... be kind now.

but reality is a far cry.. average deals go 6 to 9 months... rare is 4.

however this is very skinny only 50k in spread... this is were I see so many just don't get the math.

fees are 11,300  7% of 230k is 16,100.... 9 months of payments at 14,900 or 1,650 a month so could be a little less if they do it in 6.. buyers in this price range ALWAYS need 5k or so in closing cost help. and you miss your resale number by 5k..

so lets do the math

170k  11,300  14,900 5,000 5,000  utls tax insurance 2k and that all equals  208k so round of at 210k which is probably realistic then 2k in closing cost to resell  212k and your at 18k max profit.

so this one will bring in 10k to maybe 22k.. lots of work and some risk. nicer to have a little bigger spread if one can. and who cares how much the APR is if you sell it quick you make more money in 4 months you save 6,400 in interest and probably another 2k in tax's insurance utls ex. so quicker you pay it off the more you make and of course the HML is happy as their APR goes up.

But many hard money lenders don't have enough deal flow to keep money constantly out so the 30% apr is irrelevant if it takes you 60 days to put the same money back out.

not bad rates for a beginning borrower and its all regionalized that for sure.