Hello fellow real estate enthusiasts. I came across this company who says they do "asset-based" lending, meaning that they provide loans based solely on the property and not the borrowers credit history. They claim to fund the purchase and complete rehab, including closing costs, upfront. They charge 6 puts at close and a 16% interest only payments. The initial loan period is 6 months, with a possible 6 month extension, for a small fee of course.
I have done rehabs before and the 6 month window for a purchase, rehab, and prepare for sale is feasible, so Im trying to see what the "catch" is. I have done a little research on Josh Cantrell and his other seminars, so it seems legit, but I figured I would bring it up on this forum since there are so many people in this community who have proven to be very knowledgeable about what works and who are scam artists.
What's the catch? 6 points and 16% interest with a 6-month balloon!
Thanks Steve, for your speedy response.
Is that not common for most HML? I have no knowledge whatsoever of how the financing end works, so pardon my ignorance, but it seems like if the numbers work out, the most difficult problem would be acquiring secondary financing after the HML term is done, and of course finding renters/buyers. Ive just begin researching private money lenders, and HML, and this seems like the most possible path for someone who has the knowledge and ability, but not the credit worthiness.
I dont want to rush into anything, hence me bringing the topic to the forum, but as a new RE agent, I feel like a lot of possible deals are coming my way that I could work on if I had the funding(I know, this is a common problem). And I am really anxious to get out there.
A litte about me:
I have been a licensed electrical contractor for 18 years in the Chicago area. I have worked on over 100 rehab projects where I have assisted in the installation of plumbing,and vac systems as well. I recently became a licensed real estate broker, and have a couple of friends who have put some money together. So although we have knowledge of constriction costs, what areas are Hot, and rehab time frames, the ability to find funding for deals, and what is a "good" funding deal is where I am weak.
So any and ALL of your advice/experience is greatly appreciated.
@Mike B. what you are describing is exactly how hard money lending works. Most hmls lend on the property (asset based) versus the credit worthiness of the borrower (most traditional financing).
I don't know Josh Cantwell but based upon what you wrote on this thread it seems very plausible.
Good luck in your real estate endeavors!
Hey @Mike B.
First of all welcome to BP. It is a great place to learn.
Ironically i am at the exact opposite spectrum from you. I know how the analyzing and funding of deals is done but i dont know anything about the construction side.
As to your question, most hard money lenders are asset based and dont care about credit. However the terms on the loan you listed are very steep. I am in the process of trying to secure a hard money loan at the moment and the average terms i come across are 4pts, 10-15% interest (varies based on experience and LTV), and 80% of purchase price and up to 90% of rehab.
6pt and 16% are way too high. I even know a 100% lender but he is at 5pts and 15%. If you guys have put some money together then you dont need 100% financing and can get 4pts and 13%. It makes a big difference to your bottom line.
If you have more questions dont hesitate to reach out. I am also trying to flip in the chicago area and live in the albany park area.
Woa, that's high. 6 points and 16%? Am I reading that correct?
Thats an effective rate in the mid to high 20% range assuming a 6 month job. Its really high.
Actually, I know some associates who are contemplating singing up with Josh's program as we speak. In this industry he's apparently one of the few really doing these deals.
I believe there is a 30% equity split as well...Unless, you use as a transactional lender. So if you have to use him you want to make sure you have all your ducks in a row. There are many that claim to offer things. Most do one thing, and that is give expensive lip service.
We've negotiated a sweet deal using traditional real estate methods, institutional funding, with a solid exit to secure ROI like no other that I'm aware of. Unless, of course you are in a private trade. I know more than others, and less than others in this industry.
There are some very educated people in "Bigger Pockets" with real world experience to learn from. What I didn't learn from being one of America's top asset managers for both Chase and Citi I learned here on "Bigger Pockets."
Another avenue is to research some of your favorite posters on Bigger Pockets read posts they write. Always, keep your eyes open and LEARN. The knowledge some share you are getting "FREE." You can tell who is sincere about the job they do by the way they write, inform, and perform with educated answers.
Josh Cantwell is a set up. His deals I think are for very experienced rehabbers not for newbies. You get the job done according to schedule and pay Josh his money or else. He is also every experienced and wouldn't you think he would like to gain ownership of houses after they are already finished ? With his money he would be getting them at a deep discount. Sure you can do a project in 6 months and what if it does not sell in time? Most hard money lenders are at 2 to 4 points and most are at under 10%. He is asking 16%. If he was an investor I would have no problem but he is a lender and he puts on allot of pressure. 6 Points and 16% is extreme even for a hard money lender.
To me he is a shark in the mist of sharks , a shark of sharks, proceed at your own peril.
To start with he asks almost $1,000.00. If he gets 1000 members he is already ahead $1M. then he will lend that $1 Million at 6 points and 16% interest, nice gig !!!! Who would pay him $ $1,000.00 to join and not use him for money?
I foresee allot of things going wrong for allot of people !!!!
There is another group that offers that if the house will not sell the investor will buy the house at market prices from the seller less his investment plus his expected interest. Yeah I am going to volunteer to be an investor. These guys that put this deal together make money, $15,000.00 up front. The investor pays that on top of what is required for the project then to top it off if the house does not sell the investor is on the hook for buying the house at market rates.
These guys make things sound wonderful, easy, no problem but to me they are all shmucks !
First he will take the time to verify your deal is only the very best of deals. I do like that because I would not mind someone double checking that I have a good deal on my hand. I would pay him $1,000.00 for that and have him analyze all of my deals but I would never take his money. Like I said. Proceed at your own peril.
Disclosure: I am affiliated with Josh Cantwell, but am not being paid to reply to this thread.
Hi Mike, great question! I can personally attest to the legitimacy of my friend Josh, Strategic Real Estate Coach, and Freeland Ventures (formerly Strategic Freedom Funding)
I created my account with the sole intention of responding to your topic. For the record, yes, the "entry level" rate is 6 + 16 + profit share which is based on the amount a borrow puts down.
SREC members have access to different terms based on their relationship with SREC and, most definitely, their level of experience in the industry. For example, a high level member's rate is 3 + 13 and NO profit share.
Additionally, investing in the fund as a lender is something anyone (who, perhaps, might be looking for a better ROR in their self directed IRA) can do.
If it's something you're still considering, just call in and talk to someone. I'd give you my number, but I didn't pay the fee for a Pro account. And, honestly, I'm not being paid a dime to respond to your topic. I just really love helping people, and I believe in what we do, 100%.
I just watched the webinar and I am so leery of paying for education because there are so many who are in the RE world, especially in H-town who claim to be in the RE business and promote themselves as a guru. The truth is, the only money they make is the money they make in selling themselves to you and whatever products they are pushing. I enjoyed the webinar, of course, and yes it is steep what they charge but when they asked for 1K at the end, it turns me off. I wonder if I could do one deal with them, and then based on the success of that, then...I can pay them 1K for all the jazz they want me to use. I won't hold my breath.
I have yet to find a lender who offers 100% funding without credit being a factor, so despite the 6 points, the 16% interest rate, and the 30% profit share, I bought into Freedom Funding.
Yep. I paid the $995.
I won't go into details, but let's just say that it's not worth it.
My story is simple. I wholesale properties in my down time, making my end buyers up to 100K in profit.
I have a 3bed/2bath under contract in San Diego; asking price is 330K and the comps are at 440K.
I was hoping to use Josh Cantwell's program to scale my business a lot faster, but wholesaling will have to do for now.
Keith, I'm curious as to what turned you off to Josh Cantwell. The points and % are high and he splits profits, but if the deals are completely funded and you're closing deals, what's the drawback? I'm new to the game but have done a lot of due diligence. I'm trying to learn as much as possible......
Any recent updates on Freedom Funding with Josh Cantwell? I just listed to the webinar today. I understand the high costs of using this type of funding but if people are truly closing deals with the program then it may be worth it. Thanks.
I too am considering Josh Cantwells Strategic Freedom Funding course. I'm a new HUD homes agent in New York and need funding to buy.
@Shawn Funderburk what the deal is REALTIY check.... you will find very few fix and flips were you pay 6 points 16% and 30% of net profit to leave any money left for the person doing this.. I can see one or the other but NOT BOTH.. its too competitive for deals for this model to work..
So its hugely slanted to the lender.. and of course as stated they make a ton of dough on the 1k entry and never fund a deal because you can't find deals that make financial sense and your out your 1k.
I too would be interested in finding out more about this. I sent a PM to Account Closed. From what I've seen, it s not the best situation, but may reap better benefits than Wholesaling.
Thanks for any info anyone is able to provide.
Yes, I also got into the program for $995. And I agree, it's not worth it unless you are REAL careful with your numbers. Here is the thing, they fund the property for 65% of the ARV. That includes your rehab costs. Your responsibility is Ernest money of any amount you negotiate, appraisal, inspection, and whatever start money for rehab. They'll give the rehab start back to you as wel as anything else you put into the property including appraisal and inspection. This is after you resale or refinance.
They pay all the rehab cost. If you don't have rehab cost, then it's 65% of the ARV. You don't have to rehab. Sounds good so far right? Then you have up to 6 months to hold while rehabbing or holding property and you will pay interest only payments of 16%APR. Well, if you sell it, it would have to be for that initial ARV. Then the profits are split. You 70%, they get 30%. That SOUNDS not too bad. But then, before the profit split, they charge 6 points on the original purchase price plus $2,500 in fees and then the price of closing costs. Kind of bad, right? I think what's really bad. Well if you refi to get out of their loan, you have to refi with the original purchase price and still give them all those fees INCLUDING the charge of the 30%!!!!! You can keep the 70% in the property.
So they are making out like bandits!!! I was under the belief that if I buy and hold and refi out of their high 16% loan, I don't have to give them the 30% on top of everything else. That's not true. They don't make that clear. So buying with them and holding would be a horrible idea. Maybe, just maybe, you do a rehab, flip, hope you sell at the ARV, pay the fees, and run with your 70%. The numbers have to really work and you have to get a property probably below the 65%. Again, the final profit number for you after ALL that craziness has to work for you if you choose to use Freland Funding.
Eye opening!!! Thanks for the update @Gina Williams
Disclosure: I am a hard money lender
For comparison, here's the typical hard money loan I currently see available the market.
- $0 buy in
- 4 Points paid up front
- Typical Closing costs paid up front
- 12% rate (less if you're experienced)
- 9-12 month term
- 20% down on purchase and rehab (as low as 10% of purchase and 0% of rehab IF you're getting a great purchase price and deal)
- 0 Profit split.
You need to have funds from somewhere to get a typical hard money loan. Fortunately hard money lenders don't care where the funds are coming from. Friends, Family, a partner, HELOC, it's all fine.
I have thought about using this lending company recently to fund one deal. Like everything I've invested in over the past 20 years; I research everything thoroughly. But they seem to disclose everything up front in their lending website unless they just updated the website. Most of the things discussed in this forum is right there on their FAQ page. With respect to the $1000, its a risk-reward proposition. I am personally more risk adverse as opposed to someone else who is more conservative. I guess you can find negatives and risks in just about everything. Clearly, Josh Cantwell's program targets those who don't want to put a lot of skin in the game up front so from that regard, you get what you pay for. I don't mean to disrespect anyone on this forum but $1000 to potentially fund your first real estate deal with no money down, with the exception of the inspection and appraisal, regardless of the points, interest, fees, and profit split; doesn't seem like a bad deal for a FIRST TIME INVESTOR. But I wouldn't use it in the future if I have a capital growing real estate investment firm on subsequent deals.
The few questions or concerns I have are with the start upfront repair out of pocket. If your advertising securing investment properties with no money down through the final process of flipping and settlement and even on buy and hold investments; there should be no out of pocket money other than for the inspection and appraisal. That seems a little deceptive. And the other concern I have is with their approval of deals. So what if I pay the $995 and you keep declining deals that I submit, I have essentially given you $1000 for nothing. Now that would cause me great suspicion and concern. I want to hear from people that made that investment and actually got deals approved. Because Josh gives all of his "perfect" success stories.
See their website below.
@Mark Wainwright your BS meter is working perfectly.. great questions and I think you know the answer
This was very informative thread. I had thought about using them instead of my current HML but they are way too expensive. There are many HMLs that have better rates with lower DPs and points. However, as we all know do your due diligence and make sure your purchase, rehab costs and holding costs, and potential profit are all accounted.
Thanks to everyone who commented here. BP makes my diligence easy when I find threads like this. As a new investor, I too was once aiming at Josh Cantwell's Freedom Funding system. His most attractive feature is 100% financing. Fortunately, I dug enough to discover the costs to be more than I wanted to spend, although, I have no doubt it could work. I'm sure there are many like me out there who do their homework on a prospective property and discover that the soft costs or the construction costs require more cash or additional funding than they have access to. It is obvious that there are many, like myself, willing to pay exorbitant points and interest just to make a deal work. Some don't have the capital, or have funds tied up elsewhere.
What do you say to those of us who are short just $1k - $10k from making a deal work?