When do i talk to hard money lender?

Question

Hi,  I will get straight to the point.

First flip.

Im looking to purchase property around december and rehab through the winter. List early spring and sell asap.

i created a llc and opened a buisness account with 200k.

1.When should i contact lenders ?

Do i wait till i have a property in mind and draw out a plan/proposal , ?

or can i get pre approved now ? And how?

And

2. How important is taxreturns ? If i dont have it.

I want the loan on the LLC

But obviously its brand new and no history but a nice chunk of funds in the account.

Thank you for your time ! Any feed back is appreciated 👍

Odie Ayaga · Answer

Talk to them as soon as possible BEFORE locking up a property. You want to know how much you'll be expected to pay at closing, monthly costs, terms up front in case you need to shop around or need more funds than expected

Darius Ogloza · Answer

If the loan is in your LLC's name, you have to provide a personal guaranty.  The money in the bank is not a secure alternative to a guaranty - money can disappear in a flash.  If you find a lender willing to loan to a brand new LLC based on cash in a bank account with no personal guaranty required, please send me their number.

Michael Gessner · Answer

@Abu Haq you want to start now, idk about your localized market but I can speak on behalf of the hudson valley and it's hot, scary hot. Get your finances in order start reaching out to hmls and get them on board. Once you do find a property you will have no time to wait and source funds. Properties are going over asking the day they hit the market. I just lost a foreclosure because I went in hard money and they want cash, they have multiple high offers with financing so they kicked me to the curb. Right now CASH is king atleast hudson valley all the way upstate.

Kyle Altenau · Answer

Typically people who borrower from hard money lenders use single purpose entities. That basically means if the property you are buying is 54 Oakwood Ave, you might make an LLC called 54 Oakwood LLC. For this reason, a hard money lender is underwriting you personally, not the LLC.

Some HMLs don't require tax returns, but why don't you have any? Do you not have any income? Have you just not filed? If you're looking to begin a REI career, having your financials as healthy as possible is a key component. Bridge lenders or banks are going to require your tax returns, so realistically, if you're going to look to hold anything or ever try and leverage yourself with cheaper money, you will need tax returns.

It may be a bit early to get pre approved with a HML. But it's not too early to start putting together a list of HML you'd like to explore working with. Reach out to local networking groups and see what lenders they use. As you get closer to your target start date, I'd inquire about what kind of pre approval programs they have. Most will want to run your credit for a pre approval, so you may want to have narrowed your search down to one HML if you want to get approved. You can always just wait until you have a live deal.

When presenting to a HML, appearances can matter. I'd put together a package to bring them. I'd have my LLC docs, information on the property, a construction budget, and a few comps for the ARV. You'll also want to have an accurate personal financial statement prepared as well. At that point, the lender should be able to give you a very accurate idea of what they want. A lot of applicants I had in the past were incredibly unorganized, so just doing this puts you a leg above the rest.

Abu Haq · Answer

@kyle altenau

thank you for your detailed response. I truly appreciate it.

I am actually a fulltime realtor ,however I speacialize in rentals and low income housing. i also have a few sales under my belt and believe my experience will be a great advantage.

My problem is most of my income is in cash , and I have not filed my taxes this year. ( I know this has to change)

So I created the LLC with a silent partner,My younger brother. he has a 750 credit score with current income of 60k and can provide last 2 years of taxreturns.

I am a homeowner as well. And my credit is in the 640 range.

Being that my younger brother is a member and part owner of the llc ...i am hoping we can use his docs .

Do you think that would be possible given my circumstances ?

lenders i have my eye on

1.capital funding financials

2.funding pilot

3.lending homes

Theese lenders claim no income verification or tax returns required .

Steve Morris · Answer

"When do I talk to hard money lender?"

When you've exhausted all your other reasonable options?

When do i talk to hard money lender?

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