does this make sense?

if you find a rehab property with potential profits, can you bring in a hard money lender at 65% LTV in first position and have the seller carry back a note of 35% at second, fix the property at a new appraisal price/comp, then sell or refi cash out to a conventional loan?

im thinking the 1st lender wont give up their position not unless their 80% is paid off right? so if a hard money lender comes in at 65%, investor puts 15% of their own money to buy out the 1st position, and have the seller carry back 20% in 2nd position? am i on the right track?


im trying to see the advantages of utilizing a hard money lender or not.

any sources on educational articles for hard money lending? im still confused on this.

when does it make sense to use a HML?
when does it make sense to NOT use HML?
wouldnt private money partners be better?
is it be better to have a HML with no pre pays?
is it be better to have a HML with no title seasoning requirements?

i talked to a HML offering up to $500k unsecured credit line for rehabs and investment properties. theyre charging:
4 points to the lender,
1.5 to the originator,
10%-13% interest rate
640 FICO
No Doc
Based on credit only NOT asset.

is this a sub prime lender disguised as a HML charging big points? is this predatory lending?

ive heard true HML charge 65% and is based on the asset with no credit checks.


feel free to AIM me at d3fcon80 if you want to chat

ok ive been browsing around google and found these sites to be helpful.

http://www.privatemoneysource.com/articles/loansfaq.php
http://www.avatarfinancial.com/articles.php
http://www.avatarfinancial.com/blog.php

id really like to consider using a HML if it allows me to get into investment properties quicker and to avoid losing out on potentially good deals. i dont mind giving up some of the equitable profits in the deal just as long as i can get a small portion and just push hard to do deals in volumes.

also when i can fully understand and be comfortable about HML, i feel i can educate and influence other investors to also look at using HMLs.

maybe it can be a unique selling proposition for my niche.

until somebody spills the beans(just kidding), im going to talk to myself and create a brochure from this thread.

im looking at this from a marketing point of view by adding value to clients and investors without the whole "selling proposition" of doing the loan. my broker has been feeding me the concept, out of sight, out of mind. bring in a lead, add it to my database, and do 33 touches/contacts a year.

im thinking of sending out emails to my database leads with little tid bits of hard money information. topics such as 3 things to ask a HML, things to avoid, advantages and disadvantages of using HML, quick scenarios using HML, HML procedures, etc.

i can also pass this brochure out to my investor meetings to brand myself.

Every hml is different with there own criteria.
Some will go 70 to 75 ltv but you have to put money down int he deal,most like 65 ltv or less.That is including repairs.Credit still is a factor not so much for the lending but for seeing what type of person you are.People buying 65 ltv hml with really low scores sometimes don't pay there bills.Hml do not want the property,they want to make sure you get the rehab done so you can partner more deals with them in the future.Once you have done a few deals and have a track record with them you can do multiple properties at a time.

This is a big advantage over traditional investment loans.

I don't get your math,each scenario you present you are at 100 arv value,why would you do that?If the seller has an 80 percent ltv 1st lien position loan that will have to be paid off as the hml is like any other lender and requires 1st position.

Paying 100 percent for a property and hoping for a fast appreciation is playing with fire.David Lereah chief economist for nar shows california is down 15 percent,florida 12,and massachusetts 8 to 10.You don't want to be at 100 in a deflating market.

Why not just focus on getting sellers to do a short and save a foreclosure from going on there credit?Generally a bank will take 20 to 25 percent off the loan payoff for a short.