[Stephen Husted] (0:00 - 1:34)
I get this question asked a lot. I have money saved up, I want to buy my first investment property, I'm looking at projects that are going to need rehabbing, but I don't have the money to do that part. But here's the thing, if you can find a property that's a good deal, you can get a hard money loan where the lender will give you the construction part of the project.
So let's just break this down, quick and dirty numbers. Let's just say you bought this house for $100,000 and you go to a contractor, they look at the and you're going to need $50,000 to rehab that property. You're going to get that from the lender.
They're going to give that as a construction loan. And once they give this to you, you can start the project, but you have to understand too, that some contractors require upfront payments. So if you don't have some money set aside for that, that could run you into some issues.
Typically I don't pay most of my contractors upfront, but in Seattle, we do pay 30% upfront on our projects. But that was based on a lot of trust and over years of doing work with this particular contractor. But how it works is you bought the house, you got the 50K for your construction, and you will get the money while this project progresses in a form of a draw.
So when you do demo, let's say you did some electrical, plumbing, whatever the case may be. And you did a big chunk of that work. You're going to go to the lender and the lender is going to send somebody out or get photos to verify the work's done.
Once that work is verified, they will give you a draw and part of that money, let's say it's $10,000, your first draw, they will wire that right to your bank account. You take that money and then you pay your contractor. And this is one way to get construction money on your first project.
