Rehab-HML's
Is there someone I can PM who has direct experience with HML and rehabs? I am doing a ton of research and interested in getting started in rehabbing, but will have to go the route of a hard money loan most likely. I have some specific questions...thanks in advance.
Brian
I posted some basic HML questions previously and received no response, so I thought I would try this method! 
suntzu,
Although I am far from an expert on the subject, I have done one. What sort of info did you need?
JohnCl
Duluth! Hey you are not far away!~ Basically, I want to try and understand the terms of the agreement. I understand the 65% of the ARV, etc. But I am not familiar on the loan term, how to calculate payments etc. For instance, with a fixed loan or an ARM I am able to calcualte payment using a loan calc, and also know when the first payment is due etc. HML are a bit confusing...let me give an example and see if you can fill in the blanks..
House at 111 Jones Ave.
Price: 79,000
Repairs needed: 10K
ARV (estimated): $140k
HML is at 15% and 65% of ARV
If I close on the home on Feb. 25, what is my first payment and when is it due? What will that payment change to and when?
I would be looking to fix and flip.
Thanks for the help.
Brian
I am also interested in HML's for rehabbing. I am a newbie and would like more information about them.
Can anyone comment on how hard these loans are to come by?
HML's for rehabs are usually quite easy to get if the property has sufficient equity. There are different types of HMLoans and you might want to check the lenders tab above or do a cyber search for Hard Money Loans or Lenders in your state.
I can only comment on my experience with HML's - they are fabulous and have their place in an REinvestor's world. They are fast and relatively easy and usually based primarily on the equity in the property. Often these loans are based on 65% or so, LTV - sometimes it can be current LTV, sometimes ARV, sometimes LTV of purchase price.
Often times, these loans are interest only payments with a minimum number of months interest guarantee. Generally, loan payments will begin about 1 month after closing the deal - although some HML's have payment schedules that allow for deferred payments, balloon payments, bi - monthly payments --I've read advertisements or talked with HMLenders that write the deals in all kinds of ways. All the more reason to call around and talk with the people that do these loans.
Another point to keep in mind are the points. And/or fees and interest rates. These will all be very inflated due to the nature of the loan. Again, call around. 5-10 points would be typical with 12% - 17% rate. Some want this portion upfront, some will roll into the loan.
Some rehab HML's will loan towards an ARV. They will fund a certain amount for the deal to close then set up an escrow account for the repair funds. As you do the work and show receipts, you will be reimbursed for the funds.
I have a HMLender that I like working with and it looks something like this: 10points rolled into the loan, 15-17% interest only with 6 month interest guarantee. I like the fact that they will loan up to 90% purchase price and then roll the points on top of that. They ask me what dollar amount I want to come out of pocket with to close the deal and they work around that. They don't pull my credit report or even fill out a form and they close within about a week. They've even done HML's to people with nothing to put down.
Oh, but before you take a HMLoan, make sure you can make the payments and understand that they will come and take the property if you don't.
Shop around, it's fun.
Noel
[addsig]
Noel, quick question. BTW, thanks for the response. I am looking at a property that is selling at 72,400, with projected repairs at 9K. ARV somewhere around125-130k. If I use a HML, similar to the one you use, what will be the amount of my first payment and when will it be due? My exit strategy is to fix and flip asap. I will probably list the property as soon as I close on it, then start doing repairs. But if I have a 2,000 payment due in 30-45 days from closing, that makes me a tad nervous...what if it does not sell right away? Am I thinking right?
Thanks in advance!
Brian
Brian,
To know the amount of your first payment and to know when it will be due, you would need to talk directly with a HMLender or 2 or 3 or 4. Or like I wrote above, check some websites or the lender tab. There are some really good HML websites that break down the schedules for payments, points, interest. You cannot calculate the payment amount until you know the full loan amount and rate. And the lender you work with and you will determine which loan program payment schedules will work for you. You could get a loan that provides that you don't make the first payment for 60-90 days. Of course, the interest will acrue in the meantime.
Best thing for you to do, is click on the lenders tab above and find some HML's and read about their programs. Then do a cyber search for Hard money loans in your state. Often they will have terrific websites that can break it all down for you. Visit a bunch of these sites and absorb all that is written. Make a few phone calls and ask questions. Don't be afraid to seek out answers from direct sources.
If you do these things I say, you will learn. You will grow. If you are still confused, then send me a PM and I will try to help you some more.
PS - I wouldn't recommend listing a property for sale until it is in ideal sale/showing condition. Not all buyers will have your vision as to the outcome and may be turned off by a work in progress.
Now, go out there and make us proud!
Noel
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A little brain, a lot of perseverance and faith in the theory of it all.[ Edited by noel2 on Date 02/26/2004 ]
Ok...will do...thanks a ton Noel.
Hey,
If it is an interest only loan, which must HML are, then the calculation is pretty straight forward:
Loan X interest rate/12= monthly payment
(purchase price + repairs + points) x interest rate/12= monthyl payment
Generally the first payment is due 30 days after the loan OR on the 1st, with the first payment prorated.
The cost of the loan are high, so make sure you numbers are solid on the house.
Bruce....are you finding that having a REA do the comps will give you the best way to determine FMV or a close ARV? Is another way to be sure?
Thanks Bruce...
Brian
Hey,
For my money, that is the only way to go.
A REA will pull the houses that sold last week, month, or whatever that are an apple to apple comparison to the house you are looking at. They will do this for fee (if they are your agent).
Basically, this is the same thing that an appraiser does.
If the house is next door it is good for your purpose; if it is one mile away, it is totally useless.
Most of the wholesalers I know, pull their comps to prove a price, not to find a real value.