All Forum Posts by: Alex Breshears

Hi Mikel!

Welcome to the BiggerPockets community! There is a lot to learn. My suggestion would be to start investigating the type of investing you want to do and really deep dive into that topic. Evaluate how much it meets your goals, time commitments, skill set, etc. Next, there are tons of places in the forums to post questions! Depending on the topic, there is more than likely a place to post questions about what you are doing or need clarification on.  Start reading, connecting with others in your area, and get the needed skills for that type of investing. Good luck!

Hi Gary! As a private lender, I will tell you it would be very very very difficult to find a private lender to be at the bottom of the capital stack in this deal (so basically last to get paid behind the 1st lien holder).  Think about the situation from a 2nd lien holder's position. There is senior debt which is significant. If this deal starts to go south, the market softens, or ANYTHING happens to negatively impact the value of the property (of which you may have no control over), the 2nd lien holder is automatically underwater on the deal.  Plus with the loan amount of a bit more than a three quarters of a million dollars, that is a really big ask in a really risk position.  That is why you are likely seeing suggestions for equity investors versus having to hunt for a second lien holder. If the person bringing $770k to the table is also on title and has some say in how the project goes and has some participation in the upside, that may be a more palatable deal. 

As a private lender that lends out her own capital, I agree with other posters that mentioned first impressions are important, and also knowing your market and numbers is key.  People want to do business with people they know, like and trust.  The people you are talking to may not fall in line with one of those three key parts.  Are you giving off the vibe of a professional when talking to professionals? (This is rhetorical).  If you are already in the real estate space in your market and still having a hard time finding funding/partners, that may indicate that there is something wrong with the deal, you are talking to the wrong crowd, or you are not giving the right vibes off.  Also, I understand the frustration about not having enough capital to do the deal in the eyes of the lender, but try seeing the risk involved with lending.  We as lenders are giving someone likely $50,000 to $500,000 of our own capital and we want it to work for us. We don't want to own the property, we don't want to manage a construction site, or do tenant screening etc.  Most ethical lenders do not want to own the property, much less at a capital loss by overleveraging on the property.  The fastest and easiest way a borrower can and will default is not having the capital to make the payment or running out of capital before the scope of work is complete. The borrower may want to hold onto this property, which means they need a longer term loan in place, and would have to qualify for it, or get it stabilized and rented to qualify for some sort of commercial debt. Conventional lenders and longer term commercial debt are going to want to see reserves.  So you can see from a private lender perspective that if you don't have capital is can be very problematic not just from a loan payment standpoint but also getting the capital back out if the market slumps or the borrower is unable to qualify for a refinance.

Hi Vladimir! As a private lender, I want to see experience doing whatever the business model is you are trying (fix and flip, rental, STR etc). Also, having assets to cover holding costs of the property, having a reserve for when things go wrong, and making sure you can qualify for conventional/DSCR financing to get out of the private loan you have with me as a lender. Most private lenders are not going to have a loan term over 12 months, it is meant to be short term debt, similar to hard money loans.

To address your next question, about how to pitch a deal to a private lender. Private lending is a very relationship based model, rather than transactional.  Most private lenders (how I would define them), do not have formalized rate and term sheets, or even online applications. They want to see what you are doing in the marketplace, how you are handling business relationships, and have the assets in place to complete the deal, renovations needed or not.  Usually someone's first private loan is going to come from someone in their network, maybe someone who doesn't identify as a private lender right now, but has some capital they want to put to work for passive income. Listen to what they need. Maybe they want monthly income to help offset expenses. Maybe they are looking at just the end payoff and are willing to forego interest only payments for one lump sum at the time it is paid back.  Private lending is quite flexible! 

Hi Kenneth! Welcome to BiggerPockets. It sounds like you have been doing some research on your own, and you like the BRRR method. AWesome! That's a good headstart to have. Now it's time to figure out the where and how, along with the who. So it sounds like you want to be in the Houston market because that is where you live. Totally find, many people invest where they live. I would start with an analysis of your strengths and weaknesses. What can you bring to the table to a network of real estate investors? Do you crunch numbers really well and can talk about market stats over a pint? What about networking and bumping into new people? Are you very detail oriented or just go by the seat of your pants? Knowing these things will help you realize how to approach your investing goal. Let's say for example you have capital, but you don't have a lot of time because of your W2. You are fairly comfortable with a spreadsheet, you have run some analysis on properties before, maybe you understand the market better than the average Houstonian. Now the key is to find people that fill the gaps. If you don't have time to field phone calls from sellers who just need to walk away from their property, wholesaling for example may not be the thing for you, BUT getting to know a wholesaler in your area might be exactly who you need on your team. Someone can funnel deals your way, and you can quickly say yes or no because of your other skills and what you like to do. There are obviously a few stages to the BRRR model, so look at each one and evaluate how "good" are you at that particular stage. For example, it starts with acquisition. Like I mentioned earlier, if you are ok with analysis and feel confident in your numbers, then maybe finding someone to find deals for you is what you need in that step. The next one is renovate. Well if you have a W2 job, zero construction background, maybe that means you need to find someone to be on your team who is good at those things, or you find properties that don't need so much renovation. Then move on to the rent part. Are you planning on managing them yourself? Do you have a good grasp on tenant-landlord laws in your area? Have you joined the local landlord association? What about interviewing property managers in your market? You see where I'm going with this? Build the team from the skills, personality type and time availability you have. If you work the problem backwards like this, then you have no choice but to inevitably end up with a good deal and a lot less headaches! Good luck!

Hi Stewart! I admire your drive! I agree with some of the other posters about making sure your financial house is in order before investing in real estate. There are so many ways to do it, and knowing what you want to do, where and how are BIG components of this. So don't jump in too fast. For example, are rentals even going to get you any closer to your goal? Do you have a goal? What is that goal? Do you have a personality and skill set that supports having rentals? I personally will never ever own a long term rental again. I'd rather have a root canal done. I hated it. It didn't suit my skill set, goals or personality. But private lending did! I got the cash flow I wanted monthly, I didn't have tenants to deal with, and my borrowers and I are on the same time, our goals are aligned. When you think about the tenant-landlord dynamic, most of the time those two things are not aligned. The tenant wants as much as they can get while paying as little as possible for it (I'm very much over simplifying here) meanwhile the landlord wants the exact opposite. I mean you don't hear tenant and landlord horror stories for no reason! lol.  So before you do anything, I would really sit down with a pen and paper (seriously, write this down, doesn't have to be a novel, but spend the time writing and thinking), what do you want to get from real estate investing. Then ask yourself why.  Keep asking yourself why until you get to the root cause. For example, many people will say I want to invest in real estate so I can leave my W2 job. That's great. That's a worthwhile goal, but why do you want to leave your job?  I want to spend more time with my kids. Ok, awesome. Why do you want to spend more time with your kids? Because it is important to me to be a present parent.  Ok now we are getting somewhere.  What you really want is time freedom to build a strong family. Not to leave your W2.  So if you choose a style of investing that becomes overly time consuming, you aren't getting closer to your root goal, you are working yourself into another job. So choose wisely! and start with your end goal and why in mind!

I would say immediately. lol. If this is someone you want to build a life with, in any capacity, having that person understand your long term goals and commitment to them is crucial. It's not even about the money at this point, it is about making sure your goals are aligned. Imagine finding out later down the road that they are vehemently against real estate investing for whatever reason. Would you maintain the relationship then?  Now if you are more in the headspace of trying to build a household budget together, setting savings goals etc, that is a different conversation, but will still touch upon those long term goals. It is possible to stay in a relationship where you two have different expectations and goals around your financial lives, but the further apart you are the more friction there will be.  Finances are often the number one rule marriages break up, so think about that part too. Having "the money talk" with someone you want to build a life with is crucial.  Now think about why you are uncomfortable with discussing money with someone you obviously trust because you want them in your life over the long term.  Is it programming from childhood? Do you think this person will "go after your money"?  I would think about what's holding you back, and address that question first. Programming can be hard to get over, so just take it one step at a time!

This is an awesome post! This goes to show you the persistence you have to get the deal done and make it happen! Congrats on that one! Are your other properties in the same market as this new one?

I'm so happy you posted this deal! A lot of people end up chasing the market, and they get bit for doing it! But you came out ahead, and learned some really valuable lessons along the way! So way to go on that! And great job, it looks adorable!

Now for your situation, if you are looking for longer term loans because these are going to be more of a buy and hold situation, then I would suggest starting to cultivate people from your network who may want to invest with you as a lender, or even a capital partner. I have a book coming out with BiggerPockets in July about private lending. Being able to talk to them about how their money will be safeguarded and all the steps taken to make sure everything is above board will go a long way to getting people to trust you with their capital.