Financial Advisor · Member since 2020 · 3 posts · 0 votes
Are there any suggestions or advice on receiving hard money loans in Tri-Cities, WA? This is a new avenue I am researching for starting to invest and looking for more details on best places locally. Thanks!
Lender · San Diego, CA · Member since 2014 · 264 posts · 161 votes
6y
@Haley Helland I’m sure you’ll hear from many local investors on this post, I would highly suggest going with referral lenders, especially when you’re getting going. Few tips..
1. Local lenders tend to be more flexible and relationship based. They know the market better and may be able to offer higher LTVs or better rates for this reason.
2. Most lenders stopped lending to newbies after Covid. Some have opened up. This means it’s even more important to have a well organized plan when speaking with lenders. Experience is the most heavily weighted UW criteria so to offset that, make sure you provide a very clear, strong, and well thought out project plan. Mitigating the risk of lending to a newbie is important so good credit and good liquidity helps a lot with newbies. And of course, the deal itself needs to be solid!
3. Don’t worry about rates as much as trust and reputation. If you save $1k by going with a less known lender, yet they foreclose on you for no good reason, you could be seriously in trouble. That’s a drastic example but most lenders offer similar rates, a few hundred in savings up front is not as important as long term trust and reliability. Look for a lender you can grow with.
4. Find some possible teammates or partners. Preferably someone with experience. Lenders will use the experience from your partner, drastically lowering the cost of the loan interest and points. Not too mention the most important factor of learning from the experienced partner.
Quick rundown on hard money pricing for a new investor in the Tri-Cities area. As @Ben Stoodley mentioned, lenders strongly favor experience and it may be a great benefit to seek out a partner (looking for someone with 5+ completed flips or BRRRRs is ideal) for your first few in order to build up a track record. Although it will reduce your profits, it is my recommended avenue of attack. Keep in mind that experience is typically denoted by properties you or your entity has held title to:
Loan Amount: 75-80% of purchase+renovation, with additional cap of 65-70% of ARV, whichever is lower. Interest: 9.5-11% - as mentioned, this typically gets better and can get down into the mid-8s depending on experience/deal Points: 2-3pts Fees: varies, $500-$2,500 - always ask about what standard fees are charged. Also keep in mind that rushed closings (i.e. - less than 5 business days) will sometimes incur an additional fee Term: 6-12 months
Financial Advisor · Member since 2020 · 3 posts · 0 votes
6y
@Ben Stoodley and @Alex Chin Thank you so much for the information. This is great to keep in mind. This of course will be my first time working with a hard money lender and want to ensure that we are able to effectively partner for ideally more than one fix and flip or BRRRR.