Posted by James Strange on July 12, 2003 at 14:36:22:
First I must correct you 70,000 is big. The town where I live has a population under 2,000. And I live outside of the city limits.
Now down to business the lender can set any terms that they want. Remember Hard Money is called that because it comes from someones pocket. So if they don’t want to loan it to you they don’t have to.
But as consumer in a free country you are allowed to shop around for a better deal. When you find a deal that suites you then you can do business with that person/company.
Are there Hard Money Lenders who will lend 65 to 70% of the ARV? The answer is simple, Yes.
Since the local big city boys don’t want to play with you you will need to find a nationwide HML. I don’t know property values where you are but the nationwide guys tend to like the bigger deals.
I have been trying to break into RE investing for the last 18 months, I live in a small town in AZ,(70,000 Pop) and most of the sellers out here need to see some cash in their hands before they sign on the dotted line. I have tried to acquire hard money loans locally but the first question they ask is “do you have the repair money,” if I had that kind of money, why would I need a hard money loan!! The way I understand hard money loans is they loan from 65%-70% of ARV. I have located properties for under 50% of ARV which would leave the remainder of the 65% or 70% for repairs…am I wrong in my interpretation!!
I’m inspired by all I read on this & other message boards of deals/money made by lots of you out there. My frustration only serves to fuel my determination to succeed.
I’m going to keep on keeping on until I find my particular “niche” no matter how long it takes. It’s become my mission in life to become successful. In the meantime I’ll just keep on reading about you guys wheeling and dealing and see what pointers I can glean off your stories. My current goal is to make enough to attend the Ed Garcia workshop, get my own line of credit and then place my buying machine on High.
Your numbers sound right. I typically look for properties that will retail for double my purchase price.
$30k purchase
$10k repairs
$8k hold,sell,misc. costs
$60k sale
= $12k profit
If those are like the numbers you’ve come up with try the following:
Can you come up with or borrow $5000? Some HML’s will let you draw money after some repairs have been completed. Say you gut the place, remodel the kitchen, fix plumbing, install central air, and maybe finish most of the carpentry for $5000. Your HML will send out his inspector. The inspector says ‘yes, this property has received $5000 worth of repairs.’ The HML cuts you a check for $5000, and you go on to finish the rest of the work. Maybe you repeat the process and when repairs are completed you get another $5000.
Some HML’s are DYING to loan money. They may be pretty desperate to get their money working. Maybe you can find one that will even front you some of the repair money.
Do you have friends, family, or business associates that will partner with you? You might pay a big chunk of profits to them while you’re starting out, but at least you’re learning and making a little money in the process.
With all of this, just remember, don’t extend yourself too far. Don’t get caught in a position where you have no reserve money to bail you out if something unexpected pops up.