Buying condos with hard money loan

[21elnegocio]

Hello Mates,
I have been wanting to get 2-3 condos with a hard money loan, lender interest rates are at 14% on a 6-1 year loan term. I was wondering what can I do with those condos if I buy them with hard money loan ? I do know I want to rent them out so they can pay themselves, then I want to refinance them through another hard money loan to use that money and buy a few more.

Is this a good idea ?
If not, what would be a good idea ?

 

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[ZCP]

Simple. What does the math say? With conservative numbers for occupancy, what is the ROI / cash on cash return / cap rate / does it cash flow prior to tax deductions?

Search for @SteveO threads and study.

 

[ddzc]

I would stay away in MOST cases. I've lost a great deal of money due to condo purchasing where I read the market wrong from 2-3 years out (pre-construction sales). Pre-construction is tough bc you never know where the market will look like 2-3-4 years down the road.

With that being said, I would invest in resale in hot areas either along the water/beach or in a financial district area.

I can't speak for your area but I can speak for Toronto and surrounding areas, I now have a good understanding where to invest after years and tons of cash lost. If you mention where you live and your area of interest, we can probably help a bit further.

 

[lleone]

Hard money lending is best used when you have no other options and are specifically looking to focus on flipping a property. The reason is that the interest rate is high, so you want to use the money for the least amount of time possible. Hard money is rarely used in long term buy and hold.

 

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[H. Palmer]

Hello Mates,
I have been wanting to get 2-3 condos with a hard money loan, lender interest rates are at 14% on a 6-1 year loan term. I was wondering what can I do with those condos if I buy them with hard money loan ? I do know I want to rent them out so they can pay themselves, then I want to refinance them through another hard money loan to use that money and buy a few more.

Is this a good idea ?
If not, what would be a good idea ?

No, this is not a hard money deal.

The "hard" in hard money loans refers to the property itself, which is the collateral for the loan.
Hard money loans are usually provided to the extent of 65 - 70 percent of After Repair Value of the property.
This implies that there is a lot of repair to be done as in a rehab project.
So hard money loans are for rehabs, also called fix and flip.

If what you want is investing for so called "passive income", then you would traditionally go for a bank loan.
Banks usually lend for 70 to 80 percent of the market value, which requires you to come up with the rest, let's say 20 - 30 percent downpayment.
The interest rate for bank loans is at this point very low, so for long term investors this is an interesting route to go.

If that's not what you're looking for and you're looking for creative financing, google information on:

seller financing
lease option deals
contract for deed/land contract deals
subject to deals.

These are ways to acquire properties with mostly no money down. (Except sometimes fees).

 

[21elnegocio]

I am thinking of quickly paying these $30k condos off within 6-8 months. There is no cashflow, but the condo is being paid off.

 

[21elnegocio]

Do you guys like seller finance deals ? Have any of you bought on that way ?

 

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[Mark Bucks]

My advice is to avoid debt at all cost. You may start small if you have no big cash on hand. It's a great feeling to build business in debt-free. There are lot of great companies in debt-free such as Google, Facebook, Microsoft, and others.

Also, I recommend to start reading this book "Total Money Makeover: A Proven Plan For Financial Fitness" by Dave Ramsey. This book completely changed me from indulging into the concept of using other people's money in business venture. This will give you much deeper insights on finance.

 

[jazb]

It sounds like you aren't very sure about what you're doing. so my advice would be to stay very far away from hard credit

 

[MoneyDoc]

I would stay away in MOST cases. I've lost a great deal of money due to condo purchasing where I read the market wrong from 2-3 years out (pre-construction sales). Pre-construction is tough bc you never know where the market will look like 2-3-4 years down the road.

With that being said, I would invest in resale in hot areas either along the water/beach or in a financial district area.

I can't speak for your area but I can speak for Toronto and surrounding areas, I now have a good understanding where to invest after years and tons of cash lost. If you mention where you live and your area of interest, we can probably help a bit further.

My uncle has a few condos in downtown Toronto. Very high-demand area. Also, I've been thinking about purchasing 2-3 units in a new condo in Richmond Hill, ON. Very very hot market here... Problem in Richmond Hill is that prices are really high right now..

 

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[EvanOkanagan]

My advice is to avoid debt at all cost. You may start small if you have no big cash on hand. It's a great feeling to build business in debt-free. There are lot of great companies in debt-free such as Google, Facebook, Microsoft, and others.

Also, I recommend to start reading this book "Total Money Makeover: A Proven Plan For Financial Fitness" by Dave Ramsey. This book completely changed me from indulging into the concept of using other people's money in business venture. This will give you much deeper insights on finance.

Have to disagree with this. There's a difference between good debt and bad debt. Especially when we're talking Real Estate...

Hello Mates,
I have been wanting to get 2-3 condos with a hard money loan, lender interest rates are at 14% on a 6-1 year loan term. I was wondering what can I do with those condos if I buy them with hard money loan ? I do know I want to rent them out so they can pay themselves, then I want to refinance them through another hard money loan to use that money and buy a few more.

Is this a good idea ?
If not, what would be a good idea ?

Do you have any other options? I'd really exhaust all of your other options before you take a loan on interest rates that high. Have you been to banks? Talked with a few mortgage brokers? Asked family for a short-term loan?

 

[Chitown]

@21elnegocio

You've been given some sound advice. Here's my 2 cents:

There is nothing wrong with hard money as long as you enter the transaction knowing what is expected of you as the borrower and provided your deal has enough meat on the bone so you can eat after your lender has snatched some of those prime cuts. You also want to examine any paperwork connected to the condos to ensure you'll be able to exploit those units for profit.

You'd be surprised at the nasty goodies that awaited some condo speculators who didn't take a good look at the condo bylaws before they invested tens of thousands, or a few hundred grand, in purchase/rehab costs. They sold the places at a loss because the condo association prohibited rentals in their respective buildings.

Provided you've checked out your legal rights, you can use hard money to purchase/rehab said condos and then refinance out of that high cost money and slap on a mortgage from, preferably, a portfolio lender. I know guys who do that all day in our market here in the Los Angeles area.

I wish you well. Keep your eyes open and stay away from the "loan to own" hard guys.

 

[G_Alexander]

@21elnegocio You're scaring me with many of the questions in this thread bud.

Go read a few more books on real estate investing before you attack your next deal. I'm not patronizing you, I am watching out for you.

Pick one specific RE focus and learn it inside and out. Make money (prove yourself) in that focus. You can then add other focuses when you master the first.

 

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[H. Palmer]

You'd be surprised at the nasty goodies that awaited some condo speculators who didn't take a good look at the condo bylaws before they invested tens of thousands, or a few hundred grand, in purchase/rehab costs. They sold the places at a loss because the condo association prohibited rentals in their respective buildings.

Oh, almost forgot. Yes, before you buy a condo investigate the bylaws AND the costs of the Home Owners Association (HOA) that the condo falls under.

 

[ddzc]

My uncle has a few condos in downtown Toronto. Very high-demand area. Also, I've been thinking about purchasing 2-3 units in a new condo in Richmond Hill, ON. Very very hot market here... Problem in Richmond Hill is that prices are really high right now..

I can honestly talk about the condo and real estate market for pages and pages lol...right now it's tough and there's an oversupply and saturation of condos all over the GTA and Toronto. I made a costly mistake and analysis (I'm actually paying for it right now and trying to exit out of it) by investing in Mimico (shoot me).

If I have one solid piece of advice when it comes to pre-construction, STAY AWAY from condos! Invest in a home in a nice developing area, preferably a single. Your return will be significantly larger and I mean by a massive number. With a condo, you wont see your return for many years as opposed to a house, you can profit instantly. I have a friend who made close to 100k right at closing 1.5 yrs from purchase date, insane...only downside is the higher downpayment you have to leave.

Another major headache these days is the CRA going after investors. If they smell you from a mile away, they're coming after you. If you own more than one property, they're coming for you and want their HST which is a large sum, especially with preconstruction (up to 20-25k).

If you come out to the meet in June, I can go a lot more in depth on the subject.

 

[biophase]

Show us the numbers

 

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[21elnegocio]

I can honestly talk about the condo and real estate market for pages and pages lol...right now it's tough and there's an oversupply and saturation of condos all over the GTA and Toronto. I made a costly mistake and analysis (I'm actually paying for it right now and trying to exit out of it) by investing in Mimico (shoot me).

If I have one solid piece of advice when it comes to pre-construction, STAY AWAY from condos! Invest in a home in a nice developing area, preferably a single. Your return will be significantly larger and I mean by a massive number. With a condo, you wont see your return for many years as opposed to a house, you can profit instantly. I have a friend who made close to 100k right at closing 1.5 yrs from purchase date, insane...only downside is the higher downpayment you have to leave.

Another major headache these days is the CRA going after investors. If they smell you from a mile away, they're coming after you. If you own more than one property, they're coming for you and want their HST which is a large sum, especially with preconstruction (up to 20-25k).

If you come out to the meet in June, I can go a lot more in depth on the subject.

Tell me more about the meet

 

[DeletedUser394]

Tell me more about the meet

Why don't you literally do ten seconds of research yourself?

https://www.thefastlaneforum.com/co...et-up-summer-edition.52815/page-3#post-458850

Btw, he wasn't even addressing you. He was talking to @MoneyDoc who also happens to be canadian. Somehow I doubt you're going to go from Arizona to Toronto just for a meetup of locals.

Man this forum (or the world in general) can be frustrating. Like trying to get through a brick wall with a toothpick!!!!