Originally posted by @Bill Gulley:
I'd gladly pay $10 for a gallon of water in the desert, but not at a restaurant or grocery store! HMLs have their place, I've just never had to go there, I used conventional money starting out, used partners, private money and my own.
If that guru has a better use for his money, like lending it out, he might just use what he calls hard money, ever think why he pays $10.00 for water when he can just carry his own? May be he doesn't really have water, might be he doesn't really trust the place he takes it to, can't really think of a good reason to pay more for something than you really need to.
If you're stuck in the desert, then $10 might save your life. Just don't stay out in the desert! :)
I definitely understand what you're saying Bill, but from a financial planning stand point a HML can have quite a few advantages:
Limits Risk- deals go bad all the time "guru" or not so why lose 100% of the funds you put into a house when you could just lose 20% and the payments you made to date.
Opportunity Cost- I manage accounts that average returns in the high teens or low twentites. These are things that you see achieved through leveraged funds, hedge funds, options trading ect. So why would someone with "guru money" throw that away to save 4 points and 12%.
There is also the thought of just leveraging your money to do double digit flips at a time. Thus exponentially increasing your cash on cash return.
So its all about your available options and your opportunity cost. So if you are looking at one deal at a time and you have available cash that you have stashed under a mattress then by all means. Every product has its place. Whether its conventional lending, hml, cash ect. its all about how we leverage it to our advantage as investors
