Author Topic: Hard Money to Conventional Investment Mortgage  (Read 205 times)

Math N Money

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Hard Money to Conventional Investment Mortgage
« on: April 06, 2021, 10:03:39 PM »
I am beginning to toy with the idea of investing in real estate. I come from a background of construction and contracting so I am in a good position to consider a flip to get into a rental property. Of course the biggest barrier to entry is capital, magnified by my VHCOL area.

My simple question is, could I finance a flip with a hard money (fix and flip) loan and then use a conventional investment property mortgage to make the balloon payment? That way, I pay off the hard money loan and end up with a mortgage and a newly renovated rental property?


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Re: Hard Money to Conventional Investment Mortgage
« Reply #1 on: April 07, 2021, 10:58:10 AM »
Its called BRRRR  (Buy, Renovate, Rent (or sell), refinance, repeat).  People do it all the time check out biggerpockets. 

Look to pay around 10% interest with a point or two at close.  Guessing in a VHCOL area cash is king when buying a piece of sh1t property.  So you will probably need cash, which is where the HML's come in. But, if you can find a property that is financeable and a buyer willing to sell to you. I'd recommend that route, its just cheaper to get a 30 year up front.


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Re: Hard Money to Conventional Investment Mortgage
« Reply #2 on: April 07, 2021, 11:18:09 PM »
Yes, getting hard money involved is one way to do it.  A couple tricky things, you will need to own the property for 6 months before a fannie mae refi, so there is an interest rate risk that you will run because in 6 months who knows what we will be looking at for interest.  Hard money is expensive as srad mentioned.  It also isn't really easy to come by.  To attract hard money you need to find a great deal, be able to do the work needed, and be willing to take all the risk, and be willing to accept a lower profit.
Not all hard money lenders are the same.  I've been doing hard money lending for years, but am super selective about who I invest with and on what projects.  I've never lent without a heavy level of equity protecting my money.  There are I'm sure people out here who would be willing to take on more risk by lending on property with less equity but they will want more for their risk.
A solid option is to make hard money lenders out of people that you know.  If you are in a VHCOL area and have friends or family with equity in their own properties, see if they will do a cash out refi and lend that money to you.  Offer them a great return above their borrowing costs, or a profit share, and secure their money by either a first or second deed of trust in the new investment property.  Many times people in VHCOL areas are sitting on a lot of equity and don't always put it to work.