Hard Money on New Construction??? - Posted by FJ

Posted by FJ on August 18, 2005 at 08:58:01:

The margin is only thin because I split the gross profit with the builder and often bring in a partner to put up cash to secure the lot - so its usually a three way split - I have one house that will be done in December where I we will split 60k three ways.

Hard Money on New Construction??? - Posted by FJ

Posted by FJ on August 14, 2005 at 17:25:44:

Has anyone ever used hard money on new construction? I have four houses (300k each) under construcion with more traditional financing so I have about hit my limit. I would like to get a few more houses under way this year, I only make about 10k - 15k on each (RE is not my day job) so I dont know if hard money is a way to go?

When lots become available, I have to be ready to grab them - its a 5 or 6 month process on each…from securing the lot, working with the contractor and selling the finished (or almost finished) house. Thanks

Thin margins for new construction in Idaho? - Posted by John B. Corey Jr.

Posted by John B. Corey Jr. on August 17, 2005 at 13:29:11:


Your margins seem pretty thin. I would have expected closer to 20% on average.

With only $10K to $15K a minor project delay or problem with some materials could eat up all the profits. If a home sits on the market for a few months after it is finished that could wipe out your entire margin.

Is there a specific problem that makes the deals so thin? What can you do to improve things?

BTW - Getting financing is a function of the risk vs. the equity you can offer. If you are only making a thin margin then the lender is pretty much making a loan for the full retail price. Most lenders will have a problem with that. Are you putting in cash so the LTV is lower?

John Corey
Chelsea Private Equity LLC

Re: Hard Money on New Construction??? - Posted by John

Posted by John on August 15, 2005 at 06:55:12:

It is hard to say exactly what all HML will do. The couple I deal with occasionally, will only lend 65-70% of After repair value. The rates are 12%+ 5 points. They will only be in 1st place mortgage. Unless you have 35% down, it is probably not the best route to go.
Why do you think you hit your limit? try a different broker some lenders do not have a limit. Shop around.