I currently have about 115k that I have been turning over and over flipping 3 homes a year. I want to double that number. Im a realtor that's good at finding deals I just need more capital to do two houses every three months vs my current rate of one.
What Im thinking is that I can give a private lender or real estate hard money-Esq lender my current 112.5k and 50% down secure of the loan and let them have leans on the properties while lending to make it a 100% secure loan.
I need to acquire a line of credit for $225k so I can access cash fast when the deals present themselves and I can put in cash offers.... To summarize put down 112.5k to acquire homes that the lender can have a lein on until its flipped and sold. Anyone know or can point me in the direction of how to go about this. The Banks are giving me all NO's. I'm at a 680 credit score but my wife is a 710+ and could co-sign if needed. Appreciate any help in advance.
Hard Money Lenders don't really give "lines of credit" the same way a bank does, necessarily. Lenders always look at the property because that's where the risk is. They can offer you "up to $1,000,000", but they're still going to look at every single deal individually. You may rest assured knowing you have access to the money, but they're not going to make it available to you in a moment's notice. You'll end up with a proof of funds letter, I would imagine.
That said, you may find a private investor, like a @Jay Hinrichs who acts as a HML, but the more institutional types are not going to make the money available like a bank account.
I'm speaking generally.
What kind of price points are you looking at? Why not just find a local bank that would do the loans for you and put down the 25% and pay rehab out of pocket? Some local banks will even let you roll in the rehab costs into the cost of the loan and do 25% down for the total.
i.e. 80k purchase 30k rehab. 110k total, you put down 27,500 total.
Or the other option is to not even give the hard money lender your money. Just find a hard money lender that will do 90% of purchase and rehab. Granted, its much cheaper to use regular bank financing then a hard money lender.
But if you're making money on your deals, you'll just make a little less.
Also, why not use your money to do 3 deals a year and use a hard money lender to do the other 3? That would make more sense than using a hard money lender -as you suggested - on all 6 deals a year. You'll end up paying the points x 6 versus x 3.
In terms of lines of credits, there are some of these hard money/real estate investing funding companies that actually do lines of credits. Optimus Capital is one. They'll look at your history and other items and then can give you a line of credit.
Now, it isn't as good a bank LOC but it has some decent features.
The rate, I think they quoted me, was 10%? And then 2 pts every time I pulled the money out. And I think it was maxed out at 90% of the purchase and 100% of the rehab. Definitely lets you stretch your capital out further.
Here's the example: 80k purchase, 20k rehab. You'd get a loan of 92k and have to come out of pocket the other 8k (10% of the purchase) plus 2pts (2%) of the 92k loan so roughly $1,840 in points plus the closing costs. You'd pay 10% interest on the 92k loan going forward until it sold.
Its not as cheap as regular bank lending but its cheaper than hard money and you'll be able to spread your capital out to do 12 houses a year if you wanted. I think they gave me a limit of 1 mil to start. But basically, if you can show a track record, it can be as high as you want it (well..... to a certain extent anyway).
@Mike H. will they let you draw the money for any and all investment properties you so choose? 10/2 is within the wheelhouse for experienced investors.
Its not an unconditional LOC. It would have to be SFH's and they had minimum price points too I believe. I don't buy anything that was remotely close to their min so I didn't really care but that might be an issue for some investors too. I just know that it wasn't actually that bad. At the end of the day, if you were flipping, you'd come out ahead on using this over hard money.
But the 10% down was the problem for me since I only buy and hold. I'd have to do a cash out refi to get that 10% back and not many of the local banks (I'm at my 10 limit) I use like to see cash out refi's come thru their desk - nor do their auditors from what I've been told by a couple.
btw: Whats 10/2? Rate and points?
In terms of experience, yes, they did want to see some history. But it looks like the poster has been flipping for a couple of years now or so I assumed based on his pace of 3 a year.
yeah, the 10/2 was in reference to your interest rate/points mention.
Thank you Dave and Mike. I will look into these possibilties ASAP.... The banks want to see 2-3 years tax returns of over 100k in flipping profits so unfortunately they are not an option. I've been full time flipping now for just over 2 years and this 2017 is going to be the first time ill get close to but not at 100k in profits im usually around 60-75k a year on my 3 flips.. Thank Again
Honestly, your best bet will be to use a Hard Money Lender. Most Hard money lender will lend around 75% of the LTV, which is based on the ARV.
x 70% LTV
$175,000 Max they will loan
$180,000 Purchase Price
-$175,000 Max They will Loan
$5,000 You bring this amount to closing
Plus +$20,000 Repair costs held in escrow + $13,500 closing costs = $38,500 Total Investment.