I'm completely new to this, and just moved back to Louisiana. I am looking for an investor, but i keep getting the run around and having to go through an 'approval' i feel like it should go by the property or something not my credit score.. is this normally how it goes? Or am i just barking up the wrong tree?
Any help would be greatly appreciated.
What do you mean you are looking for an investor? What exactly are you looking for?
Here I am! LOL! My Soldiers would laugh at that too.
Hello Ashley, where are you in Louisiana and what are you trying to do? Your credit score is the only thing anyone who lends money has to go by to make a risk decision about investing with you, unless you present some other form of track record. All investments are risk decisions.
lol! Let me try again - i want to start flipping, i was in FB and got into mastery, but didn't get very far beings of the lump sum of money you have to come up with. I have looked into do hard money, but i feel like that company is extremely risky. I'm basically looking for someone like a lender? Or someone that is willing to let me atleast shadow on a deal so i don't jump in without a clue.
For the most part all private money lenders and hard money lenders are going to want to run your credit, just like any other lending institution or loan you would apply for. The credit score is the main way they can judge someones likelihood of paying back a loan. Typically you will need a minimum 600 credit score, but the higher the better. With a higher credit score you will get better terms and rates.
However, most HMLs and PMLs will want to start you off with a lower LTV if you have no experience to show. They may only be willing to lend you 65% LTV, which means you would be looking at 35% down on the loan. A local bank would likely give you a loan for 20% down on purchase and rehab, but they will want to see some experience also. Even more experienced rehabbers who use HM and PM pay at least 10% down and then make interest only payments until the deal is done and sold. And that interest rate is usually around 10% or higher.
Here's an example for you:
Lets say you have a deal where the purchase price is $150,000 and the rehab budget is $50,000. That's $200,000 needed. 10% down on that is going to be $20,000 and you will make interest only payments monthly until the property is sold. At 10% interest those payments will be about $1500 per month. If you factor in a 6 month timeframe to rehab the property and get it sold, that is another $9000. Plus you will have holding costs and commissions to factor in. Your out of pocket expense is likely to be more than $35,000 on a deal like this.
Regardless of what you do or how you go about it, know that all these gurus that tell people they can get started investing with no money are full of it. This business requires capital to get started, and then lots of it to keep things going. Even if you start out wholesaling you still need capital for advertising and marketing. Without it you wont be able to do much.
Your best bet for getting started, if you have little or no experience, is to offer a more experienced investor a deal where you help them out for free and you get to learn along the way. Most investors are pretty busy and may not have the time to allow some to shadow them or to mentor someone, but if you can make it worth their while they may be open to the idea.
Thank you so much for your help.😁
@Ashley Hirtle I having some experience in private lending in the Houston market. There are lenders out there who do lend based on asset rather than what appears on your credit. Yes, experience does play into whether a private lender would loan on a deal, but then again so does character and a few other things. Lack of experience can be overcome by bringing on experienced members onto your team. If you lack rehab experience hire an experienced GC. If you buy right you should have no problem finding a lender who will lend based on asset value. Example: Property value after rehab $100k, purchase $50k with a rehab of $20k. Those numbers would work all day long for an asset based loan. Keep looking.
Hey @Ashley Hirtle I’m a local investor in the New Orleans area... if you wanna sit down over coffee and talk shop maybe we can learn somthing from each other. I don’t generally flip but i’m Looking to get into it as historically i have been a buy and hold kinda guy and its always good to know fellow investors in your market. DM me if your intrested in figuring somthing out.
4 things a hard money lender usually takes into a consideration before lending
3 credit score
Welcome to the club!
What part of LA are you from?
I'm in SW LA the DeRidder / Ft. Polk area.
Thank all of you for your help / input! I am currently living in houma, but the economy but I'm looking to flip outside, like maybe new orleans or Lafayette area.
You are only a couple hours away, jeff!
Welcome, @Ashley Hirtle . I am in the Houma area, also.
Wonderful, Mr. Clint! Would love to meet up with you if you are open to that!
Good evening all. I am Johnpaul, also a fairly new investor in the New Orleans area currently rehabing a project now, a single family 3 bed 2 bath home. I would love to get some insight with an experienced investor.
I'd be more than happy to meet for coffee, @Ashley Hirtle
Wonderful! Just tell me when, and where.
Hi Ashely, welcome! I am in the Lake Charles Market. Presently working with Cogo financial on a deal for a 3 unit (1 duplex and 1B 1B.) I'm also talking with Direct lending partners. But right now CoGo seems to be the best I have found so far. Credit score will get you a better interest rate. I can let you know tomorrow when I get the final interest rate. They work on the strength of the deal and go as much as 70% LTV. I think it is 2.5 points and I will put 10% down.