I am an experienced Real Estate investor. I have a hard money lender that I use from time to time. I am looking for additional private money. Do you have any suggetions?
[QUOTE=sgaldinger;884916]I am an experienced Real Estate investor. I have a hard money lender that I use from time to time. I am looking for additional private money. Do you have any suggetions?[/QUOTE]
Assuming you are not just advertising and you really want some ideas…
What have you already tried? How experienced are you?
Finance
I have bought and renovated 4 properties with a total of 30 units in the last 3 years. I am holding onto the properties for now. I have used a hard money lender to purchase and rehab, then refinance with a conventional bank.
I am paying approx 18% interest for the hard money. In order to grow I need access to more money and ultimately reduce the interest expense.
I am looking for any ideas or insights on how to raise money.
[QUOTE=sgaldinger;884944]I have bought and renovated 4 properties with a total of 30 units in the last 3 years. I am holding onto the properties for now. I have used a hard money lender to purchase and rehab, then refinance with a conventional bank.
I am paying approx 18% interest for the hard money. In order to grow I need access to more money and ultimately reduce the interest expense.
I am looking for any ideas or insights on how to raise money.[/QUOTE]
From what you wrote you are using the hard money for a limited period of time before refinancing with long term financing.
18% is not that expensive compared to not having the capital available when you need it to buy a property. You might be able to do better that 18% so you should keep looking. Before spending too much time on a search, have you broken down the details?
As an example, if you were buying a SFR and used hard money for 6-9 months, the ‘high’ interest rate would have a specifici and limited impact to the total deal. If normal interest rates were 5% and you were paying 18% for 9 months, you would be paying an extra 13%/yr times 3/4 of a year. It would be less than 13% on an annual basis.
You also need to remember that a hard money lender is funding the deal a conventional lender would not touch. They might be lending on the value, not the purchase price. They are overlooking other criteria. You are paying for the extra service and the extra flexibility. It is a cost of the deal and if the deal is a great one, the cost is justified.
If you find a hard money lender with similar terms and conditions plus they charge less, great. If they charge a great deal less it is likely they have different terms and conditions.
As you are dealing with MFR you might need hard money for a longer period than would be true with SFR deals. That could be an added issue in terms of total costs.
If you were to take in joint venture cash, you would be giving up some of the future value and you would have a partner rather than a lender. It might make sense even though the cost of one is not that easy to compare to the cost of the other.
A hard money lender is taking more risk and they have a more difficult underwriting exercise. They earn more for a reason. If you want to reduce the interest costs, your best bet would be the seller as they are very unlikely to charge much more than their cost of capital. They might be less likely to accept a lower sale price if you are not immediately cashing them out. What you could save in interest costs might be lost thru a higher price.
All of the above said, I still wonder just how much extra interest you are paying in total as the time period is limited for the hard money loan. Negotiate the deal down a few percent and you can cover the interest costs.