How To Get Hard Money Under 10%?
How To Get Hard Money Under 10%?
This is a topic that we have written about on several occasions. It was so popular that we decided to write about it again and also create a video (link below). When people usually call our office one of the first questions they have is 'What percent do you charge?'. It is very rare for someone to ask the most important question which is ' How is your mortgage amortized?'. The reason this is important is because it will tell you the true cost you are paying for the loan. I will give 2 examples
Loan A
3 Month Loan at 6% and 2 points
Loan B
12 Month Loan at 14% and 4 points
Of these two loans, which is cheaper for the borrower? The short answer is Loan B because it is amortized over a 12 month period. If loan A were to be renewed 4 times over a year, it would cost 24% and 8 points. How is that for tricky math?
The easiest thing to do here is to figure out how long you intend on having a loan out and work backwards. If the loan is going to be a 12 month note at 14% and 4 points and out for 4 months, then the money is about 10% in total. This is because there is the initial 4 points paid at closing. Then the money costs roughly 1.2% per month for 5 months. The total cost of money should be around 10% here for you to use. The thing that actually has the most impact on how much that money is costing you, is you.
What I mean by that is that if you have a team in place and move quickly on you projects, you save time. If you save time , you save money. If that same loan closes out in 3 months instead of 4 , you saved 1.2% just because you executed your project ahead of schedule. If you are fast with our money it is cheaper for you. You can make the exact same 14% loan cost either 14% or 10% or even less depending on how quickly you can move.
Video On Making Hard Money Cost Less
Ian Walsh
215.839.3271
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