Good Evening BP,
I'm breaking into the BRRRR/Flip game. I've done lots of buy and hold (basically turnkey) investing in the past, but this will be my first rehab project. I'm in search of TEXAS BASED, preferably DFW BASED Hard money lenders to work with. I know there are a ton to choose from, I'm just trying to figure out who is willing to offer me the best terms. I have 6 years of REI experience acquiring and owning rentals, but again no rehab experience. I have great credit (780ish) and a healthy DTI with enough capital for down-payments/points/closing costs in the bank.
So far, the terms I've been presented have been:
13-14% interest, 2-3 points, $250-$500 in other fees, 70% LTV of ARV, no wrapping in of points/fees. Like most others in this business, I'm trying to keep as much cash in my pocket during the deal as possible to improve my COCR.
Is this as good as it gets for an experienced investor new to rehabbing? Are there any DFW based Hard Money Lenders who can beat these terms for me?
Thank you for your time.
Some HML might consider your rental experience, but most won't. They want you to have experience specifically in rehabs completed and sold. From the perspective of being considered a first time flipper, those rates/terms seem in line with most HML.
Any particular reason why you want a lender based in TX or DFW? There are plenty of rehab lenders who lend in TX but not based there. As long as they can accurately assess the deal, there's no reason to not consider them.
If you want to PM me I could get you more info.
@David Schulwitz - check out Investmark Mortgage, based out of Addison. Secured Freedom Lending is also a good one that we have used. When discussing fees, note that some HMLs charge interest on the repair funds that they are holding in escrow, which represents an additional cost to you.
@Ryan O'Mara - I think having a local lender can be a big advantage. Think of these guys as partners - the good ones anyhow; the bad ones will throw the money at you even if it is a bad deal for you, collect their points and let you sink. The good ones are part of your team and can provide a huge service as an advisor - is the deal really a good one or not; rehab or local market tips if you are newer; etc. Our HMLs have brought us deals in the past as well.
@Andy Webb - I'm not saying there aren't advantages to local lenders, I'm merely pointing out that a borrower need not limit themselves when there are plenty of good lenders that lend in TX.
I don't work with any lenders who would be so reckless with their money (or their investors money) as to throw money at a bad deal and let the borrower sink. Lenders do not have an interest in having to foreclose on a property. They want the deal to to succeed. That's how they make money. Any lender willing to behave so recklessly won't be in business long. Fools and money part quickly.
Thank you guys for the responses.
How many deals does one have to successfully complete before they can maybe bargain down on interest rates or points?
The reason I wanted someone local is exactly what Andy said. If rates and terms are equal, I want someone in the local area that if I absolutely need to see them face to face, I can.
I'll check those two out Andy - thank you for the advice again! We need to do coffee/beer one day and talk RE.
@David Schulwitz in general, a HML will start lending your a higher LTV and maybe require less down once they form a relationship with you. Sometimes the HML will be borrowing their money from another source and will be paying that source a certain number which would require them to charge you the normal interest rate. Maybe they might be able to discount a fee but don't expect much. The important thing is that you have a source you can count on and trust. I have also worked with the two lenders that @Andy Webb suggested above and would recommend them both. Also, have you visited any local DFW networking groups? It might be good to stop by a few to see who other people use in the area. Let me know if you need any other info. Thanks!
@David Schulwitz - I would not worry as much about the interest rate, since you will be in and out quickly (I hope). My bigger concern is always the fixed origination fees/points. Ideally the HML will split the points, for example if they charge 3%, ask if they will allow you to pay 1% up front and 2% on the back end. This allows you to have less cash in the deal at the start. Since we do the BRRRR strategy, this has been huge for us since the market has been appreciating, typically when we get to the refi stage the appraisals are coming in higher than budgeted and the difference in old/new appraisal and resulting higher loan amount covers that balance, so we are effectively not out of pocket on the remaining 2%.