All Forum Posts by: Rachel Pratt

Thank You so much Bronson! Thats very helpful, it really helps to know what the norm is and what things can vary. Super helpful, thanks

Thank you @Mark Burns for confirming that. Thats similar to how I thought hard money loans work. I guess my next question is, are there multiple different ways you can make a deal with hard money lenders? 

For example. Someone recently told me that the way he gets hard money loans is they loan him 80% AVR. He in turn pays them a down-payment of 20% AVR. I assumed this went towards the house, but he said it goes to the lender to hold as a sort of security deposit or collateral until the project is done. Once the project is complete and successful, he gets his downpayment money back. 

I had never heard of this before and dont have experience so I wanted to run it by the bigger pockets community. 

Does this sound right to anyone?

Hi, new RE investor here. I am looking at flip properties. I'm trying to understand exactly how hard money loans work. I've done a lot of research, but am left with one question.

So I've found that a HML will loan up to 80% of the ARV, if I provide a 20% downpayment. This is to insure that I, the investor, has "skin in the game" so to speak, makes sense. So here's my question stated a couple different ways:

- Is the downpayment towards the physical house, or is it for the loan? Is the downpayment a sort of security deposit for the loan? 

- Is the downpayment the amount I invest into the property, or do I get that money back at the end of the day once everything is said and done because it's collateral?

Help!