26.2 said:

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Nobody is going to give you hard money to finance a personal residence. Tell me if I'm misunderstanding the question/goal of your buddy.

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SteveBott said:

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ARV? At remodeled value?

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mazag08 said:

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When is it better to go the hard money route vs the conventional route? Is it purely based on not having the ability to pay a full down payment or having bad credit on a conventional loan?

I have a friend that is convinced it's a no lose scenario to go the ARV hard money route for a potential flip. I don't know enough details to inform him either way. He's pre-approved for $250,000, has enough for a 30k down payment if he went conventional, and had great credit. I believe the property he is aiming for would be in the $150,000 to $200,000 range.

Anyone with experience?

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jmazz said:

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mazag...email or call me. I've been involved in hard money since 2006...both as a borrower and now lender. Pros/cons to each scenario but the first few houses I personally purchased were through hard money. Basic scenario...

ARV: $100k
Purchase: $50k
Rehab: $20k

Conventional: Loans up to 80% of purchase...$40k loan. Borrower needs $10k down plus $20k for repairs plus closing costs, holding costs, etc. There's a chance to get some kind of 'construction' loan where repair money is escrowed but would still need some skin in the game to get going. Also have to personally/financially get approved for the loan based more on the 'conventional' qualification process.

Hard money: Loans up to 70% of the ARV...$70k loan. Escrows the $20k repair money to be released in draws. At closing, borrower only needs to come up with out of pocket closing costs (origination, title company fees, etc). With the property tax credit from seller the amount due from buyer could be slim to none. This is about as close to 100% financing as you can get. Not much, if any, personal/financial qualification...it's more about the property. Not saying if you can fog a mirror you can get a loan but the qualification process is nowhere near what it is for conventional.

A few other points...conventional might take the typical 30-45 days to close. Hard money...24-48 hours is possible. I'm funding a loan tomorrow for a call I got today. (That's going to be a 'transactional funding' loan so a little different than hard money but similar concept.)

Give me a shout.

*Very basic terms/details in this post. Some hard money lenders might require some 'skin in the game.' Hard money isn't institutional so it can be completely up to the lender how they structure things. I also funded a loan in December for a great, repeat borrower. I think it was loan #10 for them. They walked from closing, as the buyer, with a 5 figure check.

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While I have not encountered it personally I have heard in this crazy RE market of existing homeowners using hard money to buy their next home to avoid having to make a contingent offer, which are next to impossible to get accepted. Often the offer is presented as cash, when in reality there is financing, it just may be already approved. Then they conventionally refi after they sell their existing home to pay off the hard money.

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