All Forum Posts by: Ben Stoodley

Hi @Andrew O.

I'm sure there are threads on BP that go over the pros and cons of property ownership under entity VS individual. It's my understanding that the main benefits of holding title in an LLC are the tax benefits and liability/repercussion protection.

Regarding financing your flip, it all depends on what your plan is. If you want to buy a distressed property that requires significant renovations, a bank will not lend on it.

If you need to close on the house fast, a bank will take way too long. I'm located in San Diego, most investment properties receive 10+ offers, majority are non contingent cash offers! Very tough.

Hard Money does not care about title being held under an entity or an individual and it doesn't effect the rates. Hard Money is asset based, so your personal credit and financial strength is secondary. I underwrite about 100 deals a week, and in my experience about 95% of real estate investors purchase homes in a business entity, typically an LLC or Corp.

Hope this helps!

Ben

@Jackson Barr hard money lenders would definitely solve your problem if looking to invest. If this is for your primary, there are some "soft" hard money lenders that do Owner-Occupied loans, so that should be your first question - as most do not. If you don't want to spend the higher hard money rates, a good local mortgage broker would be your best bet, as they will have relationships with all the local lenders. 

Hi @Don Souza ! Not a bad idea at all. I would be happy to discuss this with you, just need more information on what you're expectations are and I can point you in the right direction. Thanks!

Hi @Megan S. and welcome to BP!

Hard Money is a great option for all investors looking to acquire properties quickly. If the investor's investment goals are only 1-2 flips/acquisitions per year, than they can likely can go conventional route. Conventional loans have many more requirements, including borrower credit and financials, as well as nicer "move in ready" property requirements. This makes it a hard match as most "good deals" require a decent amount of work. Plus, the borrower requirements are quite stringent. 

HML on the other hand are all asset based, no min credit or financial requirements (and if there are some, they are very low requirements). This means the stronger the deal you present to a HML... the better the loan they can provide you. It is done quickly and easily, closed within a few days and the renovations are also covered by the HML. Typically HML covers up to 85% of purchase price + 100% of rehab (or some variation there of).

With high interest rates, the refinance into a conventional loan on Buy n Hold properties is key. This can be done within 6-12 months usually. Check to make sure there isn't a prepayment penalty with the HML. Then make sure you have spoken to your conventional loan broker so you two have a plan of action for when it's time to refinance.

Hope this helps, good luck!

@Xia Ji this is a common question and as you can see from the responses, it is fairly subjective. As a new investor, you have no "credibility" in the investing industry. This is important when the Seller is reviewing multiple offers - which ALL godo investment properties will receive. Then, the agent/Seller will prefer the experienced "real" investors over the newbies. POF and/or LOI letters will certainly help here - especially if your name or your company name isn't a known and trusted investor.

HML don't do much preapproving on the borrower - as most of us are asset based lenders. This means we prefer to have a deal under contract before pre approving - but are happy to do either method. Some things you may want to prepare would be: your purchase price range, your location range, financial system for down payment & holding costs, experience with investing, partners you plan to bring on, etc. Theses things will be of interest to any HML interested in starting this relationship with you. The more prepared and organized you are, the better!

Feel free to reach out for any additional help.

Good luck!

@Brendon K. there are definitely a handful of reputable hard money lenders servicing the Austin, TX area. We have done numerous fix and flip loans in Austin over the past couple years and we keep hearing about more competition, so I know there are options! As most people have replied, there is always a range on rates, but generally 10-12% interest and 2-4 points is a good general threshold of expectations. Be careful of hidden fees, always ask the lenders about "all charges paid at close" and ask for a closing statement. Further fees might be found in the fund control process with wire fees, inspection fees, draw fees, etc. ALL of these type of fees can be saved by using the right lender. Anyways, feel free to reach out for more info! Good luck!!

We have a special location this month, our monthly Meetup will be held at Karl's FIRST FLIP! As most will remember, Karl is one of our fellow flippers from the Meetup group, we introduced him at our last event. He is in the process of completing his first flip at this property on Bellvale and we would love for you all to come show him support next week!

*Please note this month's Meetup is held on a Wednesday*

This event will have all the normal topics of focus - tips, tricks, education, presentations, food/drinks, networking, etc - all the most important stuff. In addition, we will be able to show you another mid-flip project done by one of your own fellow flippers, showing it's possible to enter the investment industry with little to no prior experience! This should prove hugely helpful and motivating to many of us :-)

Refreshments will be available as always. Please arrive as close to 4pm as possible. If you have any questions, please feel free to contact Ben: (619)777-8790 or [email protected].

Thanks again and can't wait to see you all there next week!

Hey @Ramin Y. - it's all been said here before, but the idea is that you have to accumulate as much cash before the market crash and then buy as much when it does decline. Also, as time continues and you feel the decline is getting closer, definitely start lowering or paying off all leveraged properties. HML or any highly leveraged property are the ones that will be in trouble first when the market dips. If you can keep those to a minimum, that is ideal. I see more and more investors borrower at lower LTVs for this exact reason. Then, have a back up strategy to your back up strategy. Having a rental portfolio that is cash flowing in areas where rent will continue to be in demand is always a safe back up. Build cash, decrease leveraged properties, increase back up plans, have cash reserves for both acquisitions and payments during decline. Good luck!

Ethan - the decision on moving to a bigger company from your current 2 private lenders depends completely on your business goals VS the capital backing of your 2 current lenders. Private lenders/investors are an invaluable resource for sure, the only downfall being ability to provide very large amounts of money (usually). So, if your goals are to increase your buying and selling abilities, carry more projects at once/throughout the year, then yes, partnering up with a bigger HML company is recommended in my opinion. Having a reliable source for "unlimited" amounts of money to use within a few days is a very pretty essential factor in becoming a successful full time investor.

Hi @Evan Ventura ,

Many good replies here. I am sure you have realized by now that private/hard money lenders are as different from lender to lender as investors are. So, everything I am about to suggest is from my experience as a hard money lender on the West coast, but should apply to the private lending industry as a whole.

• Find a reputable lender, not the "best rates" - hard money is hard money, it is expensive for a reason, they are short term and used for investment purposes with little to no borrower requirements, asset based underwriting and FAST closing. Don't be fooled by some of the newer companies offering lower rates, they aren't experienced, likely not their own money, and almost always have numerous requirements that take the advantage of hard money away.
• FAST and easy - after you've found a lender with a great track record, make sure they can close fast. Fix n Flip Investment real estate is an extremely competitive industry. Speed is of the utmost importance. Find a lender that is your financial partner and can provide quotes, LOIs and funds quickly. This will help your personal track record as an investor and help provide a competitive advantage over other investors.
• NO junk fees - every lender will have some fees, this is how they make money and can continue lending money. You need to call and ask to be provided with "all fees associated with the loan, including any processing, underwriting, draw, prepayments, etc fees". HMLs are notoroious for leaving this part out until they show up on the HUD
• NO PPP - no prepayment penalty, should never really charged, but I would strongly suggest finding a lender that is flexible on term of loan and doesn't charge a PPP
• DIRECT lenders only - I stress this for obvious reasons, that relate to my first bullet point. The worst thing to have happen is that your lender "runs out of money" or the loan doesn't get approved by back end investors, and this typically happens in the 11th hour, leaving you the borrower hanging with 1 day to close and your full EMD at risk. Direct lenders are the actual check writers and underwriters, they will be able to move much quicker, and provide better rates over the long term
• FEES in general - my experience has shown that interest rates are generally between 9-14% annualized, with between 2-5 points. I've seen different combinations of this, such as 16% interest but no points, but somewhere around 12% and 3 points is fairly common. A doc fee of somewhere around $400-$700 is common. Other than that, there should be no other fees. Anything you see below 9% and 2pts are generally reserved for very experienced investors or are set up on a line of credit. 

I hope this helps, feel free to reach out to me at anytime with further questions. I am happy to assist in anyway. Once again, NJ will be different than CA and other states I lend in , but it should be fairly close to the ranges I have provided. Take you time vetting your HMLs. You want a good one you can build a relationship with.

All the Best,