Hard Money Analysis Reality Check

[Brant Jones]

Hey BP! I am looking at hard money as a way to fund my next BRRRR deal. Although I am familiar with conventional and personal loans, hard money is something I do not fully understand yet and would welcome any help in making sense of my numbers.

Deal by the numbers...

Duplex (2/1 each side)
Purchase price: $51,000
Appraised value: $62,000
Rehab: $15,000
Loan to Cost (LTC): $66,000
ARV: $82,000

Hard money lender offering the following terms:

75% of LTC... assuming $49,500???
100% of construction costs
65% of LTARV... assuming $53,300???
10.99% IO on full loan balance for 13 months
2 points ($990), plus 6-months IO ($2,571.66) in reserves required

I am planning to use private money for the $15k rehab.

If the HML is willing to fund 75% LTC, do I simply need to bring the balance, plus points, escrow reserves, closing costs, to close the deal?

Assuming:....

$49,500 max LTC
------------------------------
$1,500 difference between purchase price and 75% LTC
$990 points
$2,571.66 IO pmts (6 mos.)
$2,500 closing costs
------------------------------
Cash to close: $7,561.66

Does this look right or am I missing something?

Are HML transactions considered cash purchases for the purpose of refinancing to a Freddie/Fannie loan in six months?

Thanks in advance for your help!

[Brant Jones]

@Joseph M'Mwirichia, the rehab will be funded by a separate private lender, not the HML.

How does it work if the HML has a minimum loan amount of $50k, but putting 10% down in this case will put our loan amount under the 50k threshold?

Do they typically make an exception, or not require a down payment?