What is the going rate for hard money?

Average is 4 points and 15% interest only. 9 month balloon. A great Hard Money rate would be 2 points and 12%. 12 month balloon.

Most will require at least 6 months worth of payments in your checking account up front.

There is not much negotiating with these type of lenders.

You can use hard money to fund a buy and hold. Get the house done and rented quickly, then do a cash out refi and pay off the hard money loan, cash flow and do it again. So HM is not limited to fix/flips. Again you need money (liquid cash) in the bank for at least 6 months worth of loan payments. They won't loan to someone that has no money. Even if it is a great deal, beware a lender that will loan to you when you can't show how you will make the monthly payments!

Michael

Excellent advice and thank you for the guidelines. In your opinion, what would be the advantage to a hard money loan to a conventional loan? In your example you mentioned getting Hard Money to fix the property, getting a tenant and then getting conventional financing to cash out and pay off the hard loan.

Hard money is good for quick decisions and also for properties that need to be fixed up and won't qualify for conventional financing. For example, one with a non working kitchen or heating system will not qualify for conventional financing.

That said, personally I've had the best success with the commercial lending departments of small local banks. They hold the loan in house, which means they set their own criteria, so they have more flexibility. Still pretty quick decisions too: funding in 2 weeks sometimes.

Typically deal was one loan for both purchase and rehab, 25% down, 5-6% interest, no points, 20 year amortization. Most of the houses needed a lot of work and the big banks wouldn't even touch it.

Hope that helps!

- Tom

Thanks for the information. Are you saying that you are getting loans for 25% down, 5 to 6% interest, no points and 20 year amortization from the local banks? Or is that from your hard money lender? I have been trying to go to small local banks and open accounts in them to establish relationships in the hopes of getting future financing. Unfortunately most of them require a substantial minimum balance. I haven't given up yet and still looking.

Keep in mind that HML will usually loan 65% to 70% of purchase price, so you will need to have some cash to buy the property. These are reasons why finding private money lenders can be very beneficial for both the investor and the PML

Thanks for your reply. I think I need to build some equity wholesaling first before I get into that. I was thinking of HML's because my credit took a beating over the past 4 years. I have closed many conventional deals in the past, but until my credit improves (which I am working on) or the fed loosens the guidelines for lenders, I have to be patient.

Hi Walter - replying to your question, "Are you saying that you are getting loans for 25% down, 5 to 6% interest, no points and 20 year amortization from the local banks?" - yes, exactly. From banks, not HML's.

Note most of these I did not have an account with to start. Generally if I found a deal, I would just call around and ask to speak to someone in the commercial lending department. There was a fair amount of documentation: tax returns, paystubs, rent roll, etc. Then they would take it to their loan committee and make a decision. These are in-house loans (portfolio lenders), so they do not resell them, and therefore have more flexibility.

Hope that helps and feel free to ask more questions!

- Tom

Thank you again for your input. I have always liked dealing with smaller, local banks rather than the larger national corporations. It is true that you usually do have to pay a little more in interest, but they can be a little flexible on somewhat non-conforming loans.

Tom is right about banks. ALL of my big time fix/flip buyers use 1 of 2 local banks, getting commercial loans. They are 20% down and around 5% interest only with a 12 month balloon. They cover rehab expenses also.

Valerie is right about PM. That's the best way to go for sure

Michael