Hard Money Loans vs Private Investors
Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes
Hard Money Loans vs Private Investors
Most Popular Reply
Investor · Richmond, VA · Member since 2014 · 88 posts · 22 votes
4yQuote from @Account Closed:
We are a construction/flipping company on the east coast Virginia area. (Currently averaging 40-50 deals a year). I know, everyone says that they are flipping that many a year, however for the sake of the question let's assume we really are doing that number to be able to gauge the amount of capital needed. I am curious if anyone has any experience who started flipping using hard money and then moved into private money. I hear a lot it comes down to track record, experience and other items. Where did you find investors past Hard Money Lenders once you established those items listed? Thank you for your time.
Jason
With a good track record of that many deals, you should have no problem at all attracting private money lenders for your upcoming deals. I do a fair amount of private lending and most of the flippers I work with, I met at REIA type meetups, so I would suggenst you attend as many of those meetings as possible. Tell everybody what you do and built good relationships with good PMLs. Both you and the PML will benefit. Check references and ask other flippers who they use for thier private money. Reach out anytime if there is anything I can do to help and good luck!
27 Replies
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
We are a construction/flipping company on the east coast Virginia area. (Currently averaging 40-50 deals a year). I know, everyone says that they are flipping that many a year, however for the sake of the question let's assume we really are doing that number to be able to gauge the amount of capital needed. I am curious if anyone has any experience who started flipping using hard money and then moved into private money. I hear a lot it comes down to track record, experience and other items. Where did you find investors past Hard Money Lenders once you established those items listed? Thank you for your time.
Jason
why do you want to go to private investors those are hml if they are in the business of lending money they just call themselves private investors and many are higher priced than a good HML you maybe using now. . Are you thinking your going to get better rates or what ? why leave your current funding source if you doing 40 to 50 a year and I have to assume profitably.. become your own lender.. first place to start is do one for cash and dont borrow.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
PS most people find TRUE private investors through friends and family and REIA type meetups..
the issue with private investors is there are going to be few and far between that can handle even a fraction of your deal flow
assume your average deal needs 250k and 40 a year you need to be spinning 10 million.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Jay Hinrichs:
Quote from @Account Closed:
We are a construction/flipping company on the east coast Virginia area. (Currently averaging 40-50 deals a year). I know, everyone says that they are flipping that many a year, however for the sake of the question let's assume we really are doing that number to be able to gauge the amount of capital needed. I am curious if anyone has any experience who started flipping using hard money and then moved into private money. I hear a lot it comes down to track record, experience and other items. Where did you find investors past Hard Money Lenders once you established those items listed? Thank you for your time.
Jason
why do you want to go to private investors those are hml if they are in the business of lending money they just call themselves private investors and many are higher priced than a good HML you maybe using now. . Are you thinking your going to get better rates or what ? why leave your current funding source if you doing 40 to 50 a year and I have to assume profitably.. become your own lender.. first place to start is do one for cash and dont borrow.
I am not sure if this answers my question, however appreciate your insight on the limited information you have off my post to respond to. Our company paid $864k in interest last year alone, cutting this number allows more profit to go to the bottom line without changing anything else in our business model. Let's use your idea and self fund 40 deals a year at an average cost of $250k that's a minimum of $3 million in liquidity we would need to spin off. Why not take our liquidity and utilize it in other areas that have good returns and find cheaper capital to maintain money costs. Also you don't pay as much tax on a loan as you would deploying your own capital. I know there are a million ways to structure it but once again my question wasn't in our model but how to find investors who would be happy with 16% annually? Thank you for your time sir.
- Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes4y
Yes, use short term debt to build capital flipping and then buy your holds with cash. That's my plan. I'd rather not use long term debt if I don't have to. But the short term debt with rehab funds is the best product a HML has to offer. Use them for what they are good for.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Jay Hinrichs:
PS most people find TRUE private investors through friends and family and REIA type meetups..
the issue with private investors is there are going to be few and far between that can handle even a fraction of your deal flow
assume your average deal needs 250k and 40 a year you need to be spinning 10 million.
Thank you Jay, The same money is getting turned around every 120 days while still a lot it is closer to 3 million. Currently paying 30% annually since it is by deal and not annualized. I appreciate your input and insight and answering my question. Thanks again.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Mike Klarman:
Yes, use short term debt to build capital flipping and then buy your holds with cash. That's my plan. I'd rather not use long term debt if I don't have to. But the short term debt with rehab funds is the best product a HML has to offer. Use them for what they are good for.
Thank you, I appreciate the response, not a terrible idea. Never really wanted to get into the SFH rental game. Multifamily yes that's the end game for us as well. Thanks
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
Quote from @Jay Hinrichs:
PS most people find TRUE private investors through friends and family and REIA type meetups..
the issue with private investors is there are going to be few and far between that can handle even a fraction of your deal flow
assume your average deal needs 250k and 40 a year you need to be spinning 10 million.
Thank you Jay, The same money is getting turned around every 120 days while still a lot it is closer to 3 million. Currently paying 30% annually since it is by deal and not annualized. I appreciate your input and insight and answering my question. Thanks again.
sent you a PM if you want to dive into this in detail hit me up.
- Investor · Richmond, VA · Member since 2014 · 88 posts · 22 votes4y
Quote from @Account Closed:
We are a construction/flipping company on the east coast Virginia area. (Currently averaging 40-50 deals a year). I know, everyone says that they are flipping that many a year, however for the sake of the question let's assume we really are doing that number to be able to gauge the amount of capital needed. I am curious if anyone has any experience who started flipping using hard money and then moved into private money. I hear a lot it comes down to track record, experience and other items. Where did you find investors past Hard Money Lenders once you established those items listed? Thank you for your time.
Jason
With a good track record of that many deals, you should have no problem at all attracting private money lenders for your upcoming deals. I do a fair amount of private lending and most of the flippers I work with, I met at REIA type meetups, so I would suggenst you attend as many of those meetings as possible. Tell everybody what you do and built good relationships with good PMLs. Both you and the PML will benefit. Check references and ask other flippers who they use for thier private money. Reach out anytime if there is anything I can do to help and good luck!
“Our company paid $864k in interest last year alone, cutting this number allows more profit to go to the bottom line without changing anything else in our business model. Let's use your idea and self fund 40 deals a year at an average cost of $250k that's a minimum of $3 million in liquidity we would need to spin off.
I’m trying to understand your dilemma, @Account Closed. If self-funding costs you $3 million, which you get back when you sell, and saves you $864k in interest, this is a 28.8% implicit return. Assuming you have the cash, it seems an easy decision to self-fund instead of borrowing -- unless your ROI is substantially greater than that right now.
Are you looking for greater leverage, a lower interest rate, longer maturity? What is it you really need?
We’ve been loaning our own money to local house flippers for years now and since day one we find all our borrowers at local real estate clubs. I would start there if I were you. Finding private lenders at a real estate club might be easy. The problem is that if you find one that is willing to lend $3M on your deals, they are going to be sophisticated enough to understand the value of their money. Terms might be better (i.e. perhaps higher leverage, longer maturity, easier to work with, etc.) but the cost might not be. That is, the interest rate might not be much lower than you’re paying now. And/or, they might want a piece of the action.
On the other hand, assuming you can find enough of them, do you really want to juggle many smaller lenders funding 40 deals at once? This could become a nightmare.
“… how to find investors who would be happy with 16% annually?”
I know you know that even the hardest of hard money is charging less than that. I have to believe you can find a large reputable HML willing to lend for less. Is there more to it than I'm reading?
“Currently paying 30% annually since it is by deal and not annualized.”
Most private/HML's will end up taking between about a quarter and a third of the profit, if that's what your 30% refers to. This is consistent.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeff S.:
“Our company paid $864k in interest last year alone, cutting this number allows more profit to go to the bottom line without changing anything else in our business model. Let's use your idea and self fund 40 deals a year at an average cost of $250k that's a minimum of $3 million in liquidity we would need to spin off.
I’m trying to understand your dilemma, @Account Closed. If self-funding costs you $3 million, which you get back when you sell, and saves you $864k in interest, this is a 28.8% implicit return. Assuming you have the cash, it seems an easy decision to self-fund instead of borrowing -- unless your ROI is substantially greater than that right now.
Are you looking for greater leverage, a lower interest rate, longer maturity? What is it you really need?
We’ve been loaning our own money to local house flippers for years now and since day one we find all our borrowers at local real estate clubs. I would start there if I were you. Finding private lenders at a real estate club might be easy. The problem is that if you find one that is willing to lend $3M on your deals, they are going to be sophisticated enough to understand the value of their money. Terms might be better (i.e. perhaps higher leverage, longer maturity, easier to work with, etc.) but the cost might not be. That is, the interest rate might not be much lower than you’re paying now. And/or, they might want a piece of the action.
On the other hand, assuming you can find enough of them, do you really want to juggle many smaller lenders funding 40 deals at once? This could become a nightmare.
“… how to find investors who would be happy with 16% annually?”
I know you know that even the hardest of hard money is charging less than that. I have to believe you can find a large reputable HML willing to lend for less. Is there more to it than I'm reading?
“Currently paying 30% annually since it is by deal and not annualized.”
Most private/HML's will end up taking between about a quarter and a third of the profit, if that's what your 30% refers to. This is consistent.
I do one deal a month or so with my folks that also have their doctors IRA working or some other higher net worth individual and rate maybe a tad lower.. but I get the e mail on Tuesday Jay my private lender had something come up and cant fund this deal I need the money Friday.. and thats the value we bring.. I did one last month in Augusta and it sold this week.. my cleint there was like I am done with private investors will jsut stick to your deal Jay LOL .. consistency and not running out of money is important.. not that we are a bottomless pit but for those that work with us I have never failed to fund if the deal hit the parameters.
- 4yBeth JohnsonPro MemberLender · Renton, WA · Member since 2018 · 227 posts · 216 votes
The issue with going through a truly private money lender, you will be hard-pressed to find one that would have the amount of capital to fund all your projects. This could be mitigated by finding a handful of high-net worth individuals or a family office to fund your deals but with the volume you do, a relationship-based local hard money lender might make the most sense. Especially with a more complex project beyond the standard cosmetic flip, novice private lenders might hamper the timelines and progress on your deal due to lack of knowledge and experience. There's a balance to strike between private money and hard money - the latter will have a lot more expertise and access to capital while private money may be a tad less expensive, should you find the right relationship. As others have said, start attending local real estate investor meetings like REIA and if your market has a social media group for investors that is local (not national ones) then you may try networking there as well. I have a really strong one on FB that I am a member of for WA state investing and it's been wonderful for making new connections and education; not to mention helpful for my business development as well. Good luck!
- 4yBobby FeinmanBusiness MemberLender · VA Beach, VA · Member since 2019 · 934 posts · 93 votes
@Account Closed
Hey Jason, We are both hard and private money lenders ALSO from VA Beach!! You are correct when you say that track record and experience play a role in private vs hard money. Credit score and liquidity are the other important factors that go into this. We ALWAYS try to fund deals with private money terms first because the cost of capital is a lot less than hard money. Credit score, liquidity, LTV, cash in the deal and the deal itself are the key components to private money terms. If we can't get it to fit in that box, then we will look at it as a hard money loan.
Hope that helps!
Bobby
- Investor · Golden, CO · Member since 2017 · 56 posts · 57 votes4y
Hi there! I'm not flipping or using hard money or even private money for that matter, but what I've gleaned over the years of listening to BiggerPockets is that private money comes through the building of relationships and to do that you must network within the industry. Meetups, conferences, etc. I think the magic saying is that if you have a good deal you will find investors who want to fund it.
That being said, I am in no way an expert in this area. I've just listened to so many podcasts that I think if you are struggling with this, it can't hurt to start meeting people in person who have gone before and come out successful.
Good luck!
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Bobby Feinman:
@Account Closed
Hey Jason, We are both hard and private money lenders ALSO from VA Beach!! You are correct when you say that track record and experience play a role in private vs hard money. Credit score and liquidity are the other important factors that go into this. We ALWAYS try to fund deals with private money terms first because the cost of capital is a lot less than hard money. Credit score, liquidity, LTV, cash in the deal and the deal itself are the key components to private money terms. If we can't get it to fit in that box, then we will look at it as a hard money loan.
Hope that helps!
Bobby
Thank you for the response Bobby, I agree good credit and liquidity come into play big time. We always average about 15% of the deal using our own capital in each project we do. This comes in different forms of course as a lot of deals are different as I am sure have seen more than me if you are a lender. this thread has got me thinking from some of the responses and I believe some people to be spot on. You get so busy running your business and the day to day of it all, you don't get as much time to go out and build new relationship etc. I am going to start there and see what shakes out. Thank you for your time and maybe we can grab lunch or coffee one day since you are a local here in VA Beach.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Patricia Berman:
Hi there! I'm not flipping or using hard money or even private money for that matter, but what I've gleaned over the years of listening to BiggerPockets is that private money comes through the building of relationships and to do that you must network within the industry. Meetups, conferences, etc. I think the magic saying is that if you have a good deal you will find investors who want to fund it.
That being said, I am in no way an expert in this area. I've just listened to so many podcasts that I think if you are struggling with this, it can't hurt to start meeting people in person who have gone before and come out successful.
Good luck!
Thank you for the advise, while it might seem obvious to some this is often overlooked like my other responses mentions, you get so busy running and growing your company sometimes you forget to look and build new partnerships to grow. I appreciate you mentioning that.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Beth Johnson:
The issue with going through a truly private money lender, you will be hard-pressed to find one that would have the amount of capital to fund all your projects. This could be mitigated by finding a handful of high-net worth individuals or a family office to fund your deals but with the volume you do, a relationship-based local hard money lender might make the most sense. Especially with a more complex project beyond the standard cosmetic flip, novice private lenders might hamper the timelines and progress on your deal due to lack of knowledge and experience. There's a balance to strike between private money and hard money - the latter will have a lot more expertise and access to capital while private money may be a tad less expensive, should you find the right relationship. As others have said, start attending local real estate investor meetings like REIA and if your market has a social media group for investors that is local (not national ones) then you may try networking there as well. I have a really strong one on FB that I am a member of for WA state investing and it's been wonderful for making new connections and education; not to mention helpful for my business development as well. Good luck!
Beth,
I think you are spot on, I have been able to find some private money but the issue there is the limit on amount available to fund deals. Hard to grow and scale with this type of limitations. The larger institutional lenders have a ton of red tape and hoops to jump through on each deal, etc. I am leaning towards more networking and growing the brand as a way to crack this issue as this seems to be the consensus among the more seasoned veterans in this arena. Thank you for the advice and insight.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Jay Hinrichs:
Quote from @Jeff S.:
“Our company paid $864k in interest last year alone, cutting this number allows more profit to go to the bottom line without changing anything else in our business model. Let's use your idea and self fund 40 deals a year at an average cost of $250k that's a minimum of $3 million in liquidity we would need to spin off.
I’m trying to understand your dilemma, @Account Closed. If self-funding costs you $3 million, which you get back when you sell, and saves you $864k in interest, this is a 28.8% implicit return. Assuming you have the cash, it seems an easy decision to self-fund instead of borrowing -- unless your ROI is substantially greater than that right now.
Are you looking for greater leverage, a lower interest rate, longer maturity? What is it you really need?
We’ve been loaning our own money to local house flippers for years now and since day one we find all our borrowers at local real estate clubs. I would start there if I were you. Finding private lenders at a real estate club might be easy. The problem is that if you find one that is willing to lend $3M on your deals, they are going to be sophisticated enough to understand the value of their money. Terms might be better (i.e. perhaps higher leverage, longer maturity, easier to work with, etc.) but the cost might not be. That is, the interest rate might not be much lower than you’re paying now. And/or, they might want a piece of the action.
On the other hand, assuming you can find enough of them, do you really want to juggle many smaller lenders funding 40 deals at once? This could become a nightmare.
“… how to find investors who would be happy with 16% annually?”
I know you know that even the hardest of hard money is charging less than that. I have to believe you can find a large reputable HML willing to lend for less. Is there more to it than I'm reading?
“Currently paying 30% annually since it is by deal and not annualized.”
Most private/HML's will end up taking between about a quarter and a third of the profit, if that's what your 30% refers to. This is consistent.
I do one deal a month or so with my folks that also have their doctors IRA working or some other higher net worth individual and rate maybe a tad lower.. but I get the e mail on Tuesday Jay my private lender had something come up and cant fund this deal I need the money Friday.. and thats the value we bring.. I did one last month in Augusta and it sold this week.. my cleint there was like I am done with private investors will jsut stick to your deal Jay LOL .. consistency and not running out of money is important.. not that we are a bottomless pit but for those that work with us I have never failed to fund if the deal hit the parameters.
I ave had this exact issue as well. I think the answer lies somewhere in a balance between relationships. Private money for the bulk and a solid relationship with a larger HML to bridge the deals that can't be done or make more sense terms wise for the rest. Thank you for your input on this and I will update everyone as we progress and find answers to this problem.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Jeff S.:
“Our company paid $864k in interest last year alone, cutting this number allows more profit to go to the bottom line without changing anything else in our business model. Let's use your idea and self fund 40 deals a year at an average cost of $250k that's a minimum of $3 million in liquidity we would need to spin off.
I’m trying to understand your dilemma, @Account Closed. If self-funding costs you $3 million, which you get back when you sell, and saves you $864k in interest, this is a 28.8% implicit return. Assuming you have the cash, it seems an easy decision to self-fund instead of borrowing -- unless your ROI is substantially greater than that right now.
Are you looking for greater leverage, a lower interest rate, longer maturity? What is it you really need?
We’ve been loaning our own money to local house flippers for years now and since day one we find all our borrowers at local real estate clubs. I would start there if I were you. Finding private lenders at a real estate club might be easy. The problem is that if you find one that is willing to lend $3M on your deals, they are going to be sophisticated enough to understand the value of their money. Terms might be better (i.e. perhaps higher leverage, longer maturity, easier to work with, etc.) but the cost might not be. That is, the interest rate might not be much lower than you’re paying now. And/or, they might want a piece of the action.
On the other hand, assuming you can find enough of them, do you really want to juggle many smaller lenders funding 40 deals at once? This could become a nightmare.
“… how to find investors who would be happy with 16% annually?”
I know you know that even the hardest of hard money is charging less than that. I have to believe you can find a large reputable HML willing to lend for less. Is there more to it than I'm reading?
“Currently paying 30% annually since it is by deal and not annualized.”
Most private/HML's will end up taking between about a quarter and a third of the profit, if that's what your 30% refers to. This is consistent.
Jeff,
I am glad you see the point I was making in my original post, the cost savings on this one issue alone is nothing but more profit for the company which will allow it to grow and do more deals which is better for all involved. To summarize we are very efficient at our model and longer terms is not really an issue. We are paying a flat rate to borrow money and normally can turn it about every 120 days. Therefore the nut we are always trying to crack is better interest on the timeframe in which we borrow it without unrealistic leverage being required but he lender. The lenders who lend money annually normally tack on all the extra fees etc as they are just brooking money. This is the benefit we see in a private direct lender as they are not lending to someone then who in return relents it out for points, fee, etc. The saying being stuck between a rock and hard place comes to mind. If lender A has people willing to pay 12% for money for 4 months and someone wants them to lend it for let's say 6% for the same time frame. Lender obviously will take the 12% every time if the risks are similar. Thank you for the reply and appreciate the insight you give.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Mike Oconnell:
Quote from @Account Closed:
We are a construction/flipping company on the east coast Virginia area. (Currently averaging 40-50 deals a year). I know, everyone says that they are flipping that many a year, however for the sake of the question let's assume we really are doing that number to be able to gauge the amount of capital needed. I am curious if anyone has any experience who started flipping using hard money and then moved into private money. I hear a lot it comes down to track record, experience and other items. Where did you find investors past Hard Money Lenders once you established those items listed? Thank you for your time.
Jason
With a good track record of that many deals, you should have no problem at all attracting private money lenders for your upcoming deals. I do a fair amount of private lending and most of the flippers I work with, I met at REIA type meetups, so I would suggenst you attend as many of those meetings as possible. Tell everybody what you do and built good relationships with good PMLs. Both you and the PML will benefit. Check references and ask other flippers who they use for thier private money. Reach out anytime if there is anything I can do to help and good luck!
Mike,
Thank you, after doing some research and spending more time on this subject I agree even more.That will be the next evolution for us, making the time to build and forge new relationships. In the past we were focused solely on building the systems, team, and business more so than this area. I guess now that we have completed the other tasks its time to look in this direction to be able to scale it. Once again thanks for the reply and wisdom.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
Quote from @Jeff S.:
“Our company paid $864k in interest last year alone, cutting this number allows more profit to go to the bottom line without changing anything else in our business model. Let's use your idea and self fund 40 deals a year at an average cost of $250k that's a minimum of $3 million in liquidity we would need to spin off.
I’m trying to understand your dilemma, @Account Closed. If self-funding costs you $3 million, which you get back when you sell, and saves you $864k in interest, this is a 28.8% implicit return. Assuming you have the cash, it seems an easy decision to self-fund instead of borrowing -- unless your ROI is substantially greater than that right now.
Are you looking for greater leverage, a lower interest rate, longer maturity? What is it you really need?
We’ve been loaning our own money to local house flippers for years now and since day one we find all our borrowers at local real estate clubs. I would start there if I were you. Finding private lenders at a real estate club might be easy. The problem is that if you find one that is willing to lend $3M on your deals, they are going to be sophisticated enough to understand the value of their money. Terms might be better (i.e. perhaps higher leverage, longer maturity, easier to work with, etc.) but the cost might not be. That is, the interest rate might not be much lower than you’re paying now. And/or, they might want a piece of the action.
On the other hand, assuming you can find enough of them, do you really want to juggle many smaller lenders funding 40 deals at once? This could become a nightmare.
“… how to find investors who would be happy with 16% annually?”
I know you know that even the hardest of hard money is charging less than that. I have to believe you can find a large reputable HML willing to lend for less. Is there more to it than I'm reading?
“Currently paying 30% annually since it is by deal and not annualized.”
Most private/HML's will end up taking between about a quarter and a third of the profit, if that's what your 30% refers to. This is consistent.
Jeff,
I am glad you see the point I was making in my original post, the cost savings on this one issue alone is nothing but more profit for the company which will allow it to grow and do more deals which is better for all involved. To summarize we are very efficient at our model and longer terms is not really an issue. We are paying a flat rate to borrow money and normally can turn it about every 120 days. Therefore the nut we are always trying to crack is better interest on the timeframe in which we borrow it without unrealistic leverage being required but he lender. The lenders who lend money annually normally tack on all the extra fees etc as they are just brooking money. This is the benefit we see in a private direct lender as they are not lending to someone then who in return relents it out for points, fee, etc. The saying being stuck between a rock and hard place comes to mind. If lender A has people willing to pay 12% for money for 4 months and someone wants them to lend it for let's say 6% for the same time frame. Lender obviously will take the 12% every time if the risks are similar. Thank you for the reply and appreciate the insight you give.
if your thinking you want to get 6% money then you need to be talking to your local community bank about obtaining a guidance line. those will tag to prime.. and usually one over prime with a point.. so that would be about 6.75% right now for the very best short term rates. Its worth the effort.. small community banks are always looking for deposit relationships you not going to get that at big banks at your size.. But community banks ( small ones ) its their lifeblood so to speak. So based on your volume you probably have millions running through your accounts not making any interest. Big bank they could care less small bank this has value.. this is what I did to start.. It got me a 100k line of credit 30 years ago and I leverage that up to over 30 million once upon a time. and i was in the exact same bizz as you . I bought homes at the court house steps.. my bank gave me a 5 mil credit line to go to auction.. then 10 mil working line. And then when I started a HML company they gave me guidance lines to make loans to folks like you and exactly we borrowed at 65 to 7% and lent at 12 to 15% plus points and made the delta.. One of my clients in KC just got a nice big guidance line and its really expanded his business .. Like I said its worth the effort you will have to fully qualify but its basically only one time then its annual tax returns PFS etc to make sure your still profitable.. With rates going up your going to have a pretty hard time finding any private money under 10% APR or even close to it.. as those with larger private moneys as others have probably stated understand the value of their money in the market place. Also with community bank in your business FICO while they will look at it and it has to be decent is not a driver for rates at ALL.
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
As per original post looking at 16% annually as that's a 50% reduction. We have great banking relationships in place but most banks all say the same thing. Real Estate is risky. Pretty much like one of my favorite stories they all try and tell you it's not that simple. Great clip. #truth to this
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
- Flipper/Rehabber · Virginia Beach · Member since 2021 · 19 posts · 6 votes4y
Quote from @Account Closed:
As per original post looking at 16% annually as that's a 50% reduction. We have great banking relationships in place but most banks all say the same thing. Real Estate is risky. Pretty much like one of my favorite stories they all try and tell you it's not that simple. Great clip. #truth to this. Not that simple clip
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
As per original post looking at 16% annually as that's a 50% reduction. We have great banking relationships in place but most banks all say the same thing. Real Estate is risky. Pretty much like one of my favorite stories they all try and tell you it's not that simple. Great clip. #truth to this
your not talking to the right banks. figure out what banks are doing small construction loans.. for instance I found Ameris bank a few years ago and while it took a year and a few new builds we did they moved us right to a 3 mil guidance line and we are building in Orlando area right now and they are out of Charlotte.. and i live in Oregon my partner is in Virginia
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
As per original post looking at 16% annually as that's a 50% reduction. We have great banking relationships in place but most banks all say the same thing. Real Estate is risky. Pretty much like one of my favorite stories they all try and tell you it's not that simple. Great clip. #truth to this
last comment .. if you spend as much time finding the right bank as you will have to spend going to REIA s and wading through all the beginners and others that talk a good game.. it will be more productive.. I got another guidance line from south Atlantic bank in Charleston for rehabs and new builds we did there same thing had to prove ourselves but then they moved us up to millions.. I cant find any lots anymore in Charleston so not active there now. But thats what I did when I would fly in to see my projects I will also make appointments with all the smallest banks. But you do need to ask up front if they make constructions loans to builder developers.. some banks simply dont make those loans but I pretty much guarantee there are banks in every market of size doing these loans other wise you would have no new construction going at all.. it can be done and you have enough size and velocity.. Just ask for a start.. dont go in looking for 5 million.. start with whatever they will give you to prove yourself. 500k 1 mil whatever.. then over time you will work it up as they see how effecient you are and your deposit relationships go up. best of luck if you try this route. Keep in mind though with community banks its the three Cs character collateral and Capacity.. Character is a big one for these banks.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.