All Forum Posts by: Doug Smith

Just a note, people think "Hard Money", "Private Money", and "Bridge Loans" are the same. They are not. 

Private Money is simply money from a non-institutional source...such as someone lending out of their personal IRA or from their savings.

Hard Money is a loan that is 100% based on the value of the collateral. Not much if any attention is paid to the guarantors, credit, income, etc. 

Bridge Loans are short-term (usually around 12 months) at a higher rate and fee to get a borrower from one point to another. For instance, a flip loan is usually a bridge loan. 

I'll let the rest of the peanut gallery take it from here. 

I've been a lender for 33 years, but most of the hard money lenders that I've seen springing up don't have a lending background. I also periodically serve as an expert witness for some area attorneys in lending and foreclosure matters. Attorney's can help with some things, but I don't know a single attorney that has a formal credit background that understands the ins and outs of underwriting a deal. They can prepare docs, research title, and other things that attorneys do, but they typically don't know credit underwriting. That's one spot that an overreliance on using only an attorney on your team can get you in trouble. There is a lot...and I mean a lot...that can go awry that most private money lenders are not aware of. Before you make your first loan, think about partnering up with someone with a true formal credit background for the first several deals. Don't just lend on the value of the property, but think about your primary, secondary, and even tertiary exit strategies on the deal. Think about your yields and how points will help you hit your yields. I could go on and on, but before you start making loans, I would implore you to seek more than just an attorney. Welcome to the wonderful world of lending. PM me if you have questions that I can help answer. 

They exist, but be mindful of your cash flow. I this era of high taxes, insurance, and historically normal rates (notice I didn't say high rates as they are currently somewhat the historical norm), it's hard to do a higher loan-to-value deal and get the rents to cover the PITI + any HOA. From a lender's standpoint, I'm not seeing many 80%+ rental deals covering the debt service lately.

Yes

I'll do it for $35K...lol

Housing prices are NOT coming down in the next six months. The problem with selling your home is that you have to find a place to go. Unfortunately, it's more expensive today than it has been in the past, but guess what, it will be more expensive in the future the longer you wait. To illustrate my point, let's look at the last major crash in housing prices. It was the most severe since the Fed has been tracking housing prices. Even if you purchased your home at the very tip-top of the market before they dropped by 19%, if you would have simply paid your mortgage payments, mowed your yard, and stayed in the house for 6 years (you had to live somewhere during that time), you would have made money on your home...and that was the worst drop recorded. My advice, you've already contracted to sell, so your committed. Suck it up and buy a house. Most likely it will be more expensive in the future. Good luck!

I convert it to small bills and roll around in it if I have it. What ever you do, don't let anyone talk you into funding EMDs, down payments, or 100% 2nds. I've been a lender for 33 years and I've seen the up and down cycles...repeatedly. Right before a downturn gurus always come out of the woodwork acting like they have this novel idea only to see their students lose all their money. If you want to talk through options, I'm always happy to chat on the phone to help someone find their way, but do you have other investors your close to that you can pool your $ with to do a deal? $20K won't do much, but you might find a local, experienced investor that you trust to join forces with. They get extra capital and you get a little experience. 

I think you're going to have to go private/hard money to acquire the property and the repair the basement. Can you also pull enough to augment the property value...say add square footage, etc...to get the ARV up to $135Kish? If you can find a way to do that, in 6 months you can use the appraised amount to take out the hard money loan using a DSCR loan with pretty much any lender at 75% LTV. Most (including us) are going to have a lower-end limit of $100K. You can borrow more than 75%, but you have to be mindful of cash-flow and interest rates. I would keep the LTV down a bit if you can. I hope that adds value for you.

That happened to me more than a decade ago. I was out of town at a conference when an old business partner "went hard" with $10K on a property. He didn't have the experience I did and thought he would "surprise me" with such a great deal. When I got back, I realized it was in a flood zone and the FEMA 50% rule would prohibit the rehab we needed to do. My head was telling me to walk from the EMD, but my ego told me I could pull it off. We lost $60K on the deal when it was all said and done. The partnership dissolved after that and I counted that $60K as "tuition". The worst loss I've taken in real estate/NPL investing. It happens to the best of us. Lesson learned and never repeated.

I think more info is needed here. Although a DSCR is lenient on your personal income, they will still require a relatively clean appraisal. You might need to flip this to a "flip" or "renovation" loan depending upon the circumstance. Are you buying this personally in your name or in the name of an entity? What is the purchase price? Do you plan on rehabbing it? How much cash are you bringing to the table and what will the loan amount be. Let's start there and perhaps I can guide you in the right direction.