If you borrown hard money to invest in properties, can you refi when banks start lending again?

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can i refi a hard money loan??? i want to buy a couple properties with hard money and fix them up just enough to be able to rent out to section 8/others to take care of the mortgage. i live in San Diego and there are hundreds of properties perfect for this kind of opportunity where rent is high and price of houses/condos to buy are low. is it possible to refi a hard money loan with a bank once the banks start lending money again? cuz ive been trying and my real estate friend says its going to be reeeeeally difficult to see any of that bailout money for awhile. any advice would be appreciated.

  1. Reply
    May 16, 2011 at 5:44 am

    Of course you can refinance a hard money loan. The thing is, most hard money loans are for six months only. They are also very pricey between the points and the interest rate.

    So, if you’re not able to refinance the hard money, you’re either going to lose the property or get stuck with renewing the expensive hard money loan every six months.

    If hard money costs 12% and 5 points (common), you’re paying 22% per year for the money. I do not think you can make money renting the property after all of your expenses if you are paying almost 2% per month for your financing.

  2. Reply
    May 16, 2011 at 6:35 am

    There are lots of hard money lenders around that would be willing to refinance. The problem is you need A LOT OF EQUITY to protect them. They often don’t even care if you work or have credit. Also look for a rate of about 7-8% with 7-8 points. Run an add in craigslist san diego and see what comes your way.

  3. Reply
    Real Estate pro
    May 16, 2011 at 6:37 am

    Yes, you can refi a hard money loan. The real issue is how much you have to put for a down-payment on these properties you want to buy.

    I’ve worked with a broker that made lots of hard money loans, they will make them for anytime period up to about 5 years.

    But they will only make the loans if you have a good size equity positions, at least 25%. Since your buying these properties with the hard money loan, they will use your purchase price as the value no matter how much you swear the property is worth more.

    Next will be the interest rate, the going rates for homes & commerical loans is about 6%-7% so I would say for a Multi year loan they will easily want to charge 10% or more plus around 5 points. I was paying 12% back in the early 90’s on a hard money loan when the going interest rate was around 8%-9%.

    So it will be tuff to make money on rentals with though kind of terms but the best of luck to you.

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