Exploring Hard Money - from Eyes Wide Shut to Open!

Ever have that profound experience where some new level of knowledge or existence is opened to you and you can't believe you didn't know about it before?  Perhaps your parents were just too mired in their jobs to help.  Perhaps they didn't know any better themselves.  Perhaps their own aversion to risk kept the veil around their heads too.

When you get a little older, maybe your friends are more interested in partying than learning and succeeding.  Maybe you always thought the path was just to get good grades, to go to college, to attempt to major in something you like, or like just enough to get a decent job. Just like millions of working and middle-class folks before you.

And thus, your eyes remain shut to possibilities.

One thing I have valued since I was young was that my parents instilled in me a foundational love of reading and self-education.  My mom said she read to me while I was still in the womb and never stopped reading to me and correcting my grammar.  My father, a hardware store owner, built little science experiments to illustrate some concept to me.  He wired a light socket to a 2x6 with a large battery at the other end of the board.  He would drop two wires into water (that has salt in it) and show me how water could conduct electricity and complete a circuit, even if the wires were not connected. So cool! 

One of these NEW levels of knowledge has been the discovery of different sources of capital for me.  Hey, I always thought that the only way to find money for things like fix-and-flip or investing in rentals was to either have the hard cash or connections (and serious collateral) at a typical bank.

Then, through Bigger Pockets, my eyes were opened!  Hard money, private money, portfolio money!  Whaaaaattt?  It makes you realize how much cash is truly out there, circulating, looking for ways to make more money.

So I did some research and came across Do Hard Money (dohardmoney.com).  After some cursory investigation, they seemed legit enough to contact, and so I did.  I had a great conversation with Don R., and so here are the nuts and bolts:

If you are going to do a 100% cash-to-close:

There are 3 levels of "entry." At $3495, you get basic access to DHM's program with support, including their Advanced Deal Analyzer, which, from their perspective, helps eliminate those properties that are unlikely to be made profitable and therefore mitigates risk for both you and DHM.  In a change of policy, DHM no longer refunds a portion of these membership fees.  This is a big change and definitely creates a roadblock for me.

The next level is $4995 and the big addition is their Advanced Finding Strategies, including immediate access to off-market deals that they source.  I'm too new to this game to comment comprehensively, but I can tell you that I've seen these suggested other sources of deals in many different articles, blogs, and books that I've already read or purchased.  Is that worth and additional $1500?

The highest level is $6995 which provides 4 one-on-one coaching sessions and the ability to have 24-7 conversation with your mentor for immediate questions that come up during your whole process.

While they don't do a credit pull, they are looking for folks with at least a 680+ credit score.

Site visits by local appraisers are $650 ea.

Property ARV must be $70k or higher (thank god!!)

Interest for initial allowance of 5 months to complete the project is 1.25%/month.

Origination points comes in at 5.5

General estimate of closing costs come in at $4800 - $5200 (their estimate).

I dunno, this is starting to feel expensive, HOWEVER, it is certainly one avenue out there for folks who feel they have no other option or who really want/need a lot of hand-holding.

Me?  I'm gonna keep looking into other lending possibilities first, but must say, now that my eyes have been opened, I'm even more excited about what can happen.  Hard Money!!

Would love to hear your take on any aspect of this topic folks!