Play ball or go Shopping - Posted by James-IN
Posted by James-IN on March 26, 1999 at 15:00:44:
You may not like what I’m going to say, but here it goes anyway. The reason they call it hard money is because it’s “hard money.” You got to remember, this guy is giving you “his” money to you without going through all the standard loan requirments of a conventional, FHA, VA or non-conforming loan. When you finally prove yourself to him that your a “good” investment, you should be able to get better terms. With hard money, he is only going by the future value of the property and your word that you will pay him back.
Hard money is best used when you can acquire a property at a substantial discount because of the ability to provide to the seller a quick closing (1-7 days). For example, “Hey seller I’ll give you .50cents/$1 in 2 days or .75cents/$1 in 30-45 days.” Also, you get the property without a second mortgage or downpayment, it’s a straight cash offer.
The industry standard for hard money is usually 40-75% LTV, 12-18% interest only, 1-5 year tems, cash in 1-7 days, with 5-10 points added to the loan. There sould be a prepayment bonus for paying back the money early.
I would suggest you spend a little more time to “shop” for another hard money lender. His 6 points should be financed into the loan, not upfront. So, your loan amount would be $65720 when you finally “flip” the property to a new buyer at $100,000. Also, you should be able to find a hard money lender that doesn’t “escrow” for repairs. The ones I use require proof that I have the money needed to do the repairs and 2 estimates for the work that needs to be done. There are plenty of hard money people out there. So, have fun and enjoy the search.
Best of Luck,