Investor · Canton, GA · Member since 2016 · 16 posts · 3 votes
Hello BP Members-
I am working with a prominent short term Fix & Flipper based in Atlanta, GA who completes roughly 8-10 projects/month. He uses Hard Money for some projects but prefers Private Lenders if possible.
- Typical APR on is 10-11%
- Average Project Time is 1.5-2 Months
- Average Time on the Market Until Sold (via retail/FMLS) is 1.5-2 Months
- Average Capital Needed Per Project is 150K
- Can use Cash or Self Directed IRA and can roll funds over from one project to the next to yield a full year or more of accrued interest
- The property itself is used as collateral and lender is in first lien position.
- Company utilizes strict purchase guidelines. 20-25% LTV, post rehab, is typical.
- Company has fix/flipped over 600 properties in the last 11 years and will be featured in the upcoming season of a well know "flipping show" on HGTV.
If you are interested in being a sole or partner, private lender for upcoming projects, please contact me so that we can discuss details and answer any questions that you may have. If you would like a hard copy investment prospectus, just send me your address.
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
9y
@jeff studer
So the borrower won't put anything down, but wants only 10-12% APR; and they want to use the money on multiple projects so it's not even close to what would be considered a "typical" mortgage where each project stands on its own merits? If they are doing, on average, 60 projects per year, they should have a credit line with a local bank to do whatever they want. Not to be Debbie Downer, but the structure you're trying to create doesn't really benefit the lender and is totally slanted toward the flipper; certainly not a win win for all.
10% down on the purchase, an escrow hold back for the rehab after the work is complete and because the flipper is a "volume" customer, reduced points after the first few deals would be more like a win win for all parties. Lenders have to make money too; after all, without the lender, the project doesn't happen. Biased, I know, but these transactions can't be one way.
Bluffton SC · Member since 2015 · 199 posts · 55 votes
9y
@Jeff Studer I'm curious about your comment that the the houses sell for 20-25% LTV. Are you saying that the houses sell for 600k to 750k? (Based on a loan amount of 150k). Are they using a lot of their own money then? if so, that's a lot of skin in the game.
Investor · Canton, GA · Member since 2016 · 16 posts · 3 votes
9y
Hi Julian
Thanks for heads up. What I meant was, when they do their due diligence, prior to acquisition, they shoot for a 20-25% gross margin when they sell (or 75-80% LTV) after the rehab has been completed.
Example:
Property Price - $50,000
Rehab Budget - $25,000
Total Cost (financed by private lender) - $75,000
ARV $100,000
So the LTV is $75%
Gross margin (profit) is 25k or 25%
Hope this makes sense. If not, or if you have any additional questions or interest, just let me know. Thanks.
Lender · Wauwatosa, WI · Member since 2016 · 571 posts · 203 votes
9y
Jeff,
A couple questions for you - Are you saying that the property "price" is the full purchase price or the loan amount? If a property costs 50k and the rehab is 25k, total project cost is 75k. If this is the case, a lender is not going to lend 75k, that would be 100% financing for total project cost. 75% LTC is 56,250. Are you hoping for 100% financing? Sorry for any confusion Im just looking for clarification.
Also, What rates are you currently getting with the HML you're working with? What rates are you looking for?
Investor · Canton, GA · Member since 2016 · 16 posts · 3 votes
9y
Hey Marty
We're actually looking for private lenders meaning that the lender(s) are actually 'the bank' and do a short term hard money loan to this particular investor. A promissory note is executed with a defined amount loaned, an agreed upon rate. The lendor(s) then get paid back their principle as well as any interest accrued after the project is completed and the property is sold. Because the average project time is 3 months, it makes the most sense (in my opinion) to roll the money over into a few consecutive projects so you can see a full 12 months worth of interest and receive the full 10% APR. It would be a prorated APR return if you only had your money in play for a 3 month period.
Hope his makes sense. Give me a call and we can chat more about it
Real Estate Investor · Atlanta, GA · Member since 2016 · 3 posts · 2 votes
9y
Good evening Jeff,
I am a new investor here in Atlanta and would love the opportunity to meet and discuss possible partnership deals. I have excellent credit, cash on hand and want to establish a very strong buy and hold portfolio. I am interested in rehabbing nd selling initially to gsin even more capital. I have access to several very wealthy people who are interested in becoming my private lender, however I want to show them some profitable deals that I have executed before "offically" presenting any projects to them to finance. Any help would be greatly appreciated.
Temecula, CA · Member since 2016 · 75 posts · 38 votes
9y
Is the return variable or fixed? If a project goes over budget due to say a unplanned event for septic or foundation issue will I get less return? Or is the 12% gauranteed?
Temecula, CA · Member since 2016 · 75 posts · 38 votes
9y
Is the return variable or fixed? If a project goes over budget due to say a unplanned event for septic or foundation issue will I get less return? Or is the 12% gauranteed?
Investor · Canton, GA · Member since 2016 · 16 posts · 3 votes
9y
The APR is fixed and the private lender is in first lien position. The borrower would not be putting any money down but has a team of underwriters and construction experts to make sure that 'they buy right'. The property is actually the loan collateral and was mostly likely purchased at a price = to 70-75% LTARV (Loan to After Repair Value). Not every project they do yields a profit for them because even the best underwriting can't plan for unforeseen fluxuations in rehab costs and market value but when you do as many projects as they do, being profitable on 3/4 of their projects still makes the numbers work for them, long term. The beauty of private lending is that the investor receives his/her principle and interest at a fixed rate, upon the sale of the property, whether the project(s) they fund are profitable for the company or not.
Lender · Norcross, GA · Member since 2015 · 65 posts · 23 votes
9y
I pay my private lenders a minimum of six months interest to ensure the return is worth their time if I am able to turn the property in under 6 months. Because @Don Harris is right, a couple thousand dollars isn't worth it if a loan is only out for 3 months. And that gives my lenders a way to earn returns above the stated interest rate.
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
9y
@jeff studer
So the borrower won't put anything down, but wants only 10-12% APR; and they want to use the money on multiple projects so it's not even close to what would be considered a "typical" mortgage where each project stands on its own merits? If they are doing, on average, 60 projects per year, they should have a credit line with a local bank to do whatever they want. Not to be Debbie Downer, but the structure you're trying to create doesn't really benefit the lender and is totally slanted toward the flipper; certainly not a win win for all.
10% down on the purchase, an escrow hold back for the rehab after the work is complete and because the flipper is a "volume" customer, reduced points after the first few deals would be more like a win win for all parties. Lenders have to make money too; after all, without the lender, the project doesn't happen. Biased, I know, but these transactions can't be one way.