OfflineWhat Hard Money Lenders normally do:
- Interest Rate: 12-18%, interest only
- Points (percent of loan amount): 2-5 points
- Term: 5 years or less
- 60 – 75 percent LTV or ARV
o The lenders can increase or decrease the interest, points, amount they lend, terms or anything with the loan. It is their money.
- ARV is After Repair Value. This means that the lender finances a percent of the value of the property or value of the home when it is fixed up.
- LTV is Loan to Value. This means that the lender finances a percent of the offer given on a home. This has nothing to do with the value.
o Examples of these are as follows:
Jane has a house she wants to buy for 150K. She offers 100K. A lender of ARV and a lender of LTV are financing 75%.
• The lender that is working with ARV will lend $112,500 (75% of $150,000 value is 112,500)
• The lender that is working with LTV will lend $75,000 (75% of $100,000 offer is $75,000)
The lender working with ARV would pay for 100% of the purchase for Jane. (It is important to note here that for hard money lenders there is no such thing as 100% finance loans. There are loans where they will cover 100% of your purchase if you purchase the home under their ARV percentage.) Her offer was $100,000. The lender would cover up to $112,500. Some lenders that work with the ARV like this will pay her money at closing also. In the scenario of Jane she could potentially get $12,500 for fix up or just money in her pocket.
The lender that works with LTV may not be bad because they may allow a second or even third loan on the property to equal 100% of the purchase and some LTV lenders will pay fix up costs.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
With the above example, since HML's do not provide 100% financing, you would ask for ARV financing from a HML so in essence it can work out to 100% financing of the purchase price with possible a cushion for repairs, closing costs, etc.?
On the other hand are you saying there are other HML's that work with LTV so that you would need multiple loans (1st, 2nd, etc) to cover 100% and repair, cosing cost etc?
Please clarify if I interpreted that correctly. Thank you & God Bless
Love, Light & Blessings,
Darlene
what he is saying is: HML's dont provide 100% financing per se, however if you can buy the property cheap enough it may work out to be 100% financing and then some, if the deals that good.
As for the HML's that work with LTV, they dont lend as high, so a lot of them will allow for a 2nd and possibly a 3rd loan to make up the difference.
YOUR HERO, SULLY
Thanks, Sully. Your reply to Reiki was helpful to me too. I enjoy reading your posts. I am just starting out and have found lots of good info on this site.
ltrunell
Itrunell, i'm glad i could help
YOUR HERO, SULLY
Sully is correct. If you ever ask a hard money lender if they do 100% they will tell you NO. They will lend off the value of the property. If you get you offer low enough you can have the entire purchase, fix up costs, and closings costs covered - thus for you it was a 100% purchase - for the lender is was a 70% of the value transaction.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
I just had a HML pull out on me because of the national financial situation(or so he said). I have been talking to other HML's today trying to find another lender. All of them are telling me that they will not lend more than 90% of the purchase price regardless of the LTV. Is anyone else hearing this, or am I contacting the wrong people? The reason they are giving, is that the RE matket is too volatile, and they want borrower to be invested.
Al
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I have an investor that has $100,000.00 cash that he wants to invest. I would like to use this investor as a financial source for me to borrow from instead of outright giving him investment properties. For ex. My husband and I have a home remodeling co. Since we have been doing RI we have come across allot of owners who are willing to partner with us if we will pay to do the rehab. We would then flip the house and split the profit. However we have no money to use for the materials to do a partnership on a flip.
If we could some how use this investors money as a source for us to borrow from to do the rehab and then flip the house we could then pay the investor back once the house is retailed and still end up with a profit.
How do I present this to this investor in a way that will make it worth his time? How much of a return do I offer him? How do we put this in contract if he agrees to do this? Can anyone help??
Do not fear, for I am with you; do not be dismayed, for I am your God.I will strengthen you and help you; I will uphold you with my righteous right hand. Isaiah 41:10
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