What is The Best Hard Money Loan

Hard Money Programs

Hard Money. There are many types of hard money or fix and flip financing programs available today. The question many investors are asking is, what is the best option for me. This answer really depends on your circumstances because there is no one best option for every investor. That is  one major advantage of working with a hard money mortgage broker who will properly represent your interest and not just sell the program they have.  Most Real Estate Investors want to put no money down for the purchase and get 100% financing of the rehab as well. They also want the lowest interest rate and lowest points and fees. Unfortunately, you can not have both the best terms and no investment. So here are important factors to consider when determining the best  hard money loan purchase rehab program for your situation. Consider these points:

• How much money do you have for the down payment
• How much money do you have for renovation
• How much experience do you have as a fix and flip real estate investor
• Are you working on other projects now
• What is the return on this investment
• Are their additional potential projects you can do before this one is complete
• Do you meet lender guidelines

No Money Down Financing

On the surface this should be the best option always because you are not investing any money for the purchase or rehab of the property. In reality the Hard Money Lender is taking all of the risk while you earn the majority of the profit. For the increased risk the rates and fees are higher. Therefore if you have options the added costs of 100% financing may not be to your benefit. You must weigh the options. Obviously, if you do not have the funds for down payment and renovation or you are working on other projects now, the 100% financing may be your only option. You must realize the Hard Money Lender will either take an equity position or charge higher points and fees. Typical hard money terms are  about 20% to 30% down payment (or more), 10% to 12% interest rate and 3 to 4 points. You may get a lower down payment with similar terms if you have very good credit and substantial experience as a fix and flip real estate investor. In contrast for no money down option you would pay 16% to 18% interest and 8 to 10 points, plus you have a shorter term to complete the project generally 3 to 6 months. These higher rates and fees generally equate to a cheaper equity partner. Most equity partners who put up all the money get at least 50% of the profit.

How to Qualify for 100% Financing Hard Money Loan

Most Hard Money Lenders that offer the 100% financing option look at two major qualification requirements. The first is the property. What is the purchase price, the as is value, the cost of rehab and the after rehab value. If they can realize an after rehab value of no more than 60% to 70% of their total investment of the purchase price and rehab costs (some lenders even cover closing costs if the ARV LTV is good) and their profit is sufficient then the most important criteria is met. Secondly, the HML considers the experience of the investor. How many projects have they completed in the last year or two. Many require three to four recent projects before they would consider a fix and flip investor experienced.

Finally choose the no money down hard money loan if you have no choice or if you are working on other projects and just do not want to deploy your funds. There are investors who only use OPM (other peoples money) and their philosophy is to do as many deals as possible without using their own money. You can make an informed choice.