OfflineI am trying to understand the costs of using a hard money lender. Can someone tell me if this is correct (all numbers are estimates);
Purchase price: 100,000
HML rate: 12.5%
HML loan%: 70%
Points: 7
So at closing my costs would look like this,
30 % of the loan: 30,000
HML points: 4,900
Closing Costs(estimated 7%) 7,000
Total cost to close 41,900
And holding cost would be around 700 a month plus taxes and insurance.
I would need to sell at 110,901 to realize a profit if I sold in the first month.(I know that is not possible and it doesn't include rehab costs, its just so I understand).
Is there right? Is there anything else that I am missing?
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You will probably have title and recording fees, along with a title transfer fee (at least we have in WI). And depending on who pays the title INSURANCE, you may have that too at closing. In WI it is typically the seller. But you will want to be clear on these. Also, even though you would want to sell ASAP don't make the term with the HML too short (you'd rather be on the safe side than run out of time).
Like anything, you want to have your exit strategy/ies clear in your mind even before offering on a property. And if using a HML, you DEFINITELY want a GREAT deal.
And I think most will lend based on the ARV, not FMV, so you might not need as much up-front as you think. Remember there are other sources of funds that will not require you to have so much at closing, including private money or seller-financing. But that's great that you are looking into all avenues. HMLs definitely have their place.
Wishing you much success!
Rina
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