Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
7y
Well, when you say loan officer, it sounds like you think you are going to deal with a bank-like lender. That is not what is available to first time flippers unless you have a lot of assets and a great w-2. If you do, walk into the local branch of a small local bank and start there.
If not, and you don't have rich friends or family, you are looking at hard money lenders. Google metro detroit hard money lenders and you will have plenty of choices.....most will not be great....some will be scams....some will be totally fine. Do your homework, don't pay upfront fees, and pay attention to the details. They do not operate and are not regulated like your friendly neighborhood loan officer. The reps you will be in contact with are commission based salesmen and are trying to get as much money out of you as humanly possible.
Lender · Elmhurst, IL · Member since 2018 · 100 posts · 24 votes
7y
Hi Tymesha,
There are institutional private money lenders who can help with your first project. Initially... You'll put down 20-25% on the "as-is" purchase (LTC). You'll pay for the rehab work upfront then be reimbursed up to 85% of the cost, and the loan amount will be capped at 65% or 70% of the after repair value (ARV).
The terms you'll be offered are based on your credit scores, liquidity, and investor experience. You'll pay points and standard closing costs. You can expect better terms once you build up a successful investor track record.
There are institutional private money lenders who can help with your first project. Initially... You'll put down 20-25% on the "as-is" purchase (LTC). You'll pay for the rehab work upfront then be reimbursed up to 85% of the cost, and the loan amount will be capped at 65% or 70% of the after repair value (ARV).
The terms you'll be offered are based on your credit scores, liquidity, and investor experience. You'll pay points and standard closing costs. You can expect better terms once you build up a successful investor track record.
Best,
Dave
Dave, Just curious about the exact companies you are talking about. The phrase "institutional private money lender" is an oxymoron. If they are institutional, they are not private lenders.
There is certainly some cross over in which people have tried to clean up the traditional hard money lender business and make it look more presentable and professional with larger funds and slick websites. But in the end, it is still asset based hard money lending.
Can you give an example of what you consider an institutional private money lender?
Lender · Elmhurst, IL · Member since 2018 · 100 posts · 24 votes
7y
Hi Eric,
My employer is an institutional private money lender. We are backed by a 2B hedge fund. We have guidelines like conventional but obviously we are a conventional lender. We only originate business purpose loans.
My employer is an institutional private money lender. We are backed by a 2B hedge fund. We have guidelines like conventional but obviously we are a conventional lender. We only originate business purpose loans.
So are you just saying you are a private lender because that is the marketing plan...because that is not what private lending is. The way some foods say they are organic when they aren't, just because it sells. What makes you a private lender? Being backed by a hedge fund doesn't make you an institution.
Not that this is any big deal so I don't want to belabor the point but for example, here is the definition of Private Lender right here on Bigger Pockets. It actually specifically says "non-institutional", again making the phrase "Institutional Private Lender" an oxymoron.
What is a Private Money Lender?
Definition: A private money lender is a non-institutional (non-bank) individual or company that loans money, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction. Private money lenders are generally considered more relationship-based than hard money lenders.
Lender · Elmhurst, IL · Member since 2018 · 100 posts · 24 votes
7y
Yes... I guess we're going to agree to disagree. We are an institution. We are lending private money. We're regulated as a lender. We have auditors in house as we speak.