Hard Money or Traditional Financing? - Posted by Scott Brown

Posted by Terry (IN) on January 20, 2001 at 13:18:26:


Your idea is good, however most investors buying these notes will want to see an 80-10-10. There may be some, but I’m not aware of any note buyers that won’t require at least a 10% down payment for a non-owner occupied property. I do know of one that will do an 87-3-10 (that’s still 10% down) but the discount is pretty stiff.

Terry (IN)

Hard Money or Traditional Financing? - Posted by Scott Brown

Posted by Scott Brown on January 19, 2001 at 13:44:36:

I’m looking at duplex in my area (Sacramento, CA). I can make a positive cashflow, but I have no cash (my wife wants it all to fix our current home :slight_smile:

So here’s my question. How do I get the money to purchase this place?

I thought about getting a home equity loan on our home to cover the 30% down (about 25K) for traditional fincancing now and make an offer once I’ve made a couple payments. That way it doesn’t look like I’ve taken the loan out for the down payment. However, that will take a 2-3 months and who knows if the duplex will still be available.

So, I thought about getting a hard money loan to acquire the property and then seek traditional financing when the hard money loan comes available. Is this a good idea?

All input please!

Re: Hard Money or Traditional Financing? - Posted by Kevin Subbert

Posted by Kevin Subbert on January 20, 2001 at 24:26:44:

My advice is to not ever use any money secured by your home as a means to purchase investment property. Hard money, on the other hand, uses the investment property as security, if something goes wrong they forclose on the INVESTMENT property.

Hard money lenders will only lend you 65% LTV so you need to get a discount when you buy. They usually want to be in the 1st position so you cant get a hard money loan just for a down payment.

An idea that comes to mind to get into the place cheap is to have the seller create a 90% 1st mortgage and a 5% 2nd, and you come up with the other 5% cash. Then have the seller sell the 1st at closing for the cash out he needs and carry the 2nd. If you have good credit and the property can show good cash flow, the seller shouldnt have to discount too much.

Just my thoughts
Kevin Subbert