Updated 4 months ago on . Most recent reply
Educated But Lacking Funds
I am curious about these hard money lenders and if there if forsure 100% financing or if there's loopholes.
I understand ROI and how to properly raise the ARV regardless of location while not going over the top making the home the most expensive in the neighborhood. I plan to keep LTV around 67% at most.
Luckily I am in a great location to get into investing. I'm hungry to get started since my upbringing kept the wrong knowledge in front of me. Now on my own at 30 I understand what I need to do I'm just lacking funds..
My true goal is to buy land and open an aging out of adoption community but im taking one step at a time
Most Popular Reply
Hard Money is a real industry. Now, does that mean there are phonies out there looking to collect upfront fees then ghost, sure. That's any industry.
Hard Money is like a firearm, when used correctly by trained personnel it gets the job done, and done well, but when used by some cowboy who doesn't understand what they are holding, it can go sideways, especially some lenders DO NOT do closing funds check on borrowers which I think is crazy.
I've put together 40+ deals, and have brokered 100s more. I also get intel from the Seminar circuits and the conventions as my friend is a Senior L/O for a huge Hard Money company and he gets sent everywhere for them and his lender has lots of deals with those RE bootcamps where investors learn how to BRRRR and he sits in on all the lectures and we make notes.
There's a clear cut way to do this well, there's no doubt. A big part of it is property sourcing. You need to be a cash buyer who is an advantage buyer. Foreclosures, Owner needs to get out, vacant for years, auction, short-sale, some wholesale but be picky. You buy for cash at hopefully 60% - 80% of the market price. Then you have 4 choices of exit:
1) Sell as-is for a profit. You don't touch a thing. You bought this property for 75k and someone on day one wants to give you 110k for it. It isn't something you'd like to keep based on area, house type, parking, whatever and you can just make a private sale and make a 40% return in a few months.
2) Do a very light rehab and list it to be someone's rental purchase. You're not gonna want to keep it, but someone else will because it should cash flow ok. So you do a rental quality finish and then put it on the market. Maybe 20k - 30k. New floors, paint, redo the kitchen and bathrooms. Now you get to list this for like double what you paid for it cause a portfolio building investor will come along and gobble it up.
3) Do a flip finish and put it up against the highest comps for the high return. You go to a lender, and now you use Hard Money. You cash out of the property and also ask for the rehab funds needed. You go into an interest only bridge loan for like 6 months until the project is done and then list, hopefully it sells in month one. But this is the biggest short term windfall. B/C you started ahead of the game by purchasing under market. So where the investor in option 1 enters at 110k and puts 80k in, you entered at 75k, and put 80k in. His project cost is 190k, yours is 155k. He really wants to sell at 280k but he'll have to sit maybe and catch the right buyer. You can list the house for 260k and make more than him.
4) Do a nice rental finish and put it in the portfolio. You like it, you wanna keep it. Go to the lender, do the bridge loan with rehab, but when done get a renter and then refinance. But only take what cash you have in, leave the rest in the house and keep the mortgages low and cash flow high. Again, your mortgages will be way cheaper than the investor in option one.
Most of us are the investor in option 1, you gotta be the game master in a sense, not a player. Cause I tell you, when you are the investor in option one buying at market or near market, when things go bad....your safety net shrinks up real fast. When you are the game master with all 4 exit plans in place, getting stuck is not a thing really.
I just bought a property at Auction for 40k on Monday, plan is to sell it to a wholesaler for like 65k and they will offload for 70k - 75k. But eventually you need to be playing in all the steps. That's the goal, be burning and churning so many properties that you are exiting at every step all the time.