HML Offered me a $1 MILLION DOLLAR CREDIT LINE.
Thank you ahead of time for reading as I am excited, but at the same time feel I need to have a solid plan and everything organized ahead of time.
As someone who is newer to real estate, but with high goals and expectations for myself, I am always looking for creative financing and ways to make deals work. My original goal when I started was to do 50 flips in 1 year, but recently I realized that with just my capital, (around $150000), that would be hard to do as I can not do real volume. Hoping to find some options I called what is to me essentially a hard money broker who I have worked with on almost all of my deals and asked her if she knows people who finance real estate businesses. A few days later she came back to me wit these options, #1 has been indicated to me will be no problem to get me approved.
#1: 1 million dollar line we can apply for right now,
80% of Purchase Price (no holdback)
10% interest rate
3 points paid upfront to establish the line plus $2000 in legal fees
1MM minimum line
$1000 flat fees per deal
#2: 5 million dollar line, need to have closed 10 flips in the last 2 years, so we would need to get a couple more closed for you. Need $25,000.00 in liquid assets, just need to show in your bank balance when we apply. Once we meet this criteria, we can apply with them, the the terms are as follows:
Up to 85% loan to cost on transactions (no hold back)
Interest rates from 8.75- 10% depending on the loan to cost
2.75 each time you pull off the line (so don’t have to pay for whole line up front) for loans over 100k
4% each time for loans under 100k
$499.00 admin fee each time you use
Again can turn as many times as you are bale in 12 month period and both can be renewed annually. Both claim to close fast, 5 days or so and can be used for purchases, or also refinancing if you have a property that you are holding on to that’s free and clear and want to take some cash out of. That’s about it, let me know if you have any other questions and if you want to move forward. Thank you!
I was extremely surprised when she told me I should approve for the Million dollars, because I guess I wasn't expecting that much, and I have to admit the % million was slightly intimidating, but I am someone who takes advantage and makes the most out of opportunities no matter how much I have to step up my goals. So if I did qualify for the 5 million I would just put in that much more effort and be that much more creative.
PROBLEM:
1- Because I only have $150000, and two properties which after refinance would give me about $110000 in equity(which I don't think would matter for the project I would use this money for anyways), I would not have enough capital to fully take advantage of either credit line as far as closing the deal with my 20%, nor rehab costs of at least $25000 per property.
Options I have thought of for solutions:
1- Finding the money by bringing in partners who can either cover the rest of the money needed (I'm figuring around $400,000 total, so 250k more accounting for down payments rehab, and taking into account 6 mo. of monthly payments with the Million dollars maxed out.
2-Some company's can qualify you for what Ive heard up to $150000 of business card which you can cash out at 0% interest for a year(have contacted some a company to see if I qualify for this).
3-Have my mom join as partner to business and refinance her house to take out approx. $180000. (don't really want to do this because she will try to be the professional even though she doesn't do real estate.
Opportunities:
So far I have done flips, renovation of rental properties, and financed a short term note. With this I can branch out, or stick with the familiar.
1-Flipping properties on a larger scale. If I can flip all properties completely within 3-4 months(which is what I've been doing) I should be able to hit at least 30 per year focusing on properties in the 50-$150000 dollar range. ( I realize I will have to find more contractors which I am in the process of doing.
2-Flip some, and branch out into development, which at the moment I don't know much about, and as far as starting out goes, could take time to break ground, getting everything approved and permitted by the city, finding home plans and such. I do beliewve though if done properly can have a higher return than flipping it seems.
3-Flipping apartment/s 20-40 units, maybe bigger if I can get approved for the 5 million. (possibly the easier transition over development at the moment because I have done 2 4 plex's. There was a 36 unit that sold for 1.7 mil recently that I was looking at focusing on raising money for building below average condition, and rents at market from 3 years ago. Atm here in vegas I believe with those things remedied, it could be worth 3.5-4 million easily. (One of those deals I feel bad about not going for).
4-Starting a DM campaign to get better deals with better margins with some of my own capital.
As far as terms for bringing people in I have a lot on my mind, including charging them the fees related to the hard money lender to take risk off of myself, which I am justifying possibly being fair as the credit line that I probably qualify for leads to much more opportunity for all in the long run.
Would love some input from people familiar with this type of financing, as well as options for finding money, ways to flip this money, strategy's etc. Looks like I can't put @Jay Hinrichs for some reason. I hope he sees it as I feel he would have some great input. Thank you all.
