All Forum Posts by: Ben Stoodley

Hey @Grant Anderson  - I definitely agree with all the responses here. I am a realtor and hard money lender. I recently had a buyer interested in a home that had a very similar situation, but tied to the Solar system that was installed on the subject property. Lender ran the other way, Buyer couldn't even consider it as an option anymore. 

If the margins were big enough to include the $30k in payments that future Buyer would be making, than you may want to consider. But in those cases, you should just use hard money or a conventional investment loan if possible. That way you don't run the risk of shrinking your buyer pool, because in the end, every little extra add on money-wise is a deterrent to the end buyer. 

Sounds like it was a tight deal anyways - I'd pleasantly pass on this investment, in my opinion. Best of luck! 

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Hi Bradley Adams this does sound like a good opportunity for your first real estate investment. Most hard money lenders will require a min of about 15% down toward the purchase, which with your HELOC won't be a problem. You'll be able to find lenders that will lend for the full rehab portion as well, assuming it meets their underwriting criteria for the ARV, After Repaired Value. HML are mainly asset based, so the rehab estimates and ARV estimates are important in obtaining a preliminary quote. You should be expecting a loan with rates around 10-12% interest and 2-4 points. Be sure to do you due diligence on any other fees involved with their loans. Let me know if you need any further help on this and I'd be happy to explain in detail. Good luck!

I agree with @Jason Hirko on this. In my experience, the vast majority of my clients use our company to finance the majority of the deal (80% of purchase + 100% of rehab costs), then they bring in partners for the down payment (20% of purchase + closing and holding costs). This is for CA where the price points are very high, so even though they only have to come up with 20%+, it still equals $100k+ , which is a lot of money out of pocket for one person for one deal. So the advantage of JV deals, is that you wouldn't have to spend all $100k yourself, then you can use your personal capital to do this on multiple deals at once. Hope this helps @Joe Schaak

Hi @Jo-Ann Lapin .... I am going to send you a PM with my contact info. I am a HML in San Diego. We may be able to refer some deals to you, as it seems like you lend on certain property we do not. Thanks!

Hi @Joe Schaak ... I believe @Jason Hirko is correct in regards to your original 20-25% ROI question. This is very likely in regards to a Joint Venture agreement. Private money here refers to individual investors who invest with the flipper. If I gave you $50k to flip a house, I would expect $10k-$12.5k profit from you when you are done flipping. This would be calculated by the flipper (you in my example) prior to fully purchasing the house. The flipper would know the Purchase Price, the Rehab costs from his contractor, and the estimated ARV Sales Price. The flipper likely would use a Hard Money Loan to cover the majority of expenses (80% of purchase price + 100% of rehab for example). The flipper then knows what his commitment is to be (approximately 20% of the purchase price + holding costs). THIS number is what's used for their ROI calculations, as it is the Cash on Cash ROI, or what the flipper will make based on what he actually spends out of his pocket (not the entire cost of the project, as it is leveraged with a HML). Hope this helps. Let me know if you need further explanation.

Hi @Deisy Chavez and welcome to the best online portal for a huge amount of info! You may be able to do a cash out refi through a bank, but definitely a hard money lender. Typically, hard money lenders will do a cash out refi for somewhere between 50-65% LTV on current market value of the property. Feel free to send me more information and I would be able to better assist you with some options. Good luck!

Hi @Cyndi Price and welcome to the best online source of REI!! If the 203k loan doesn't apply, I think your best option may be to use a HML to acquire and rehab the building first, then refi out into a conventional loan. This is essentially the BRRR method - Buy, Rehab, Rent, Refi.... Justin on here teaches this method very well. A hard money loan on something like this would finance up to 80% of the purchase price + 100% of the renovation costs. Rates would range from 9-12% with an origination charge of 2-4 points. There shouldn't be more than about $600 in "other fees". Make sure there is NO PREPAYMENT PENALTY and the lender is flexible on extensions. After you renovate the property, get it rented asap and let the property/loan mature for about 6 months at least and you should then qualify for a conventional loan. ** I would speak with a mortgage broker to review your options for the refinance out of the hard money loan, so you know what to expect in terms of LTV and how long you will need to pay the Hard Money rates. I would bank on a 12 month Hard Money loan, then refi somewhere in the 6-9 month range, assuming all goes fairly well. Feel free to reach out with questions. Good luck!

@Mabel L. you definitely have gotten a ton of good information on this post and it will all come down to your personal opinions regarding how much money and time you want to spend on this. There are always good deals, finding them is the hardest part, as you've seen. In my opinion, the bigger metro areas of CA is always a safe bet to invest in because of the ever growing draw to live here. The high priced homes keep renting as the only option for the vast majority of people living here. I live in SD and would feel comfortable buying rentals here all day long, because I know the rental market very well. Yes, the cash flow is lower because of the CAP rates but it's such a strong market that you don't have to worry as much about the serious losses. These markets always tkae the least hit and rebound the fastest. Long term more passive investments are still very doable here, as there are places of SD expanding with increasing values. I would try to focus on those areas of expansion.

Investing in a HML fund is also a great option. That would be my number 2 option for you, in my biased opinion (I am a HML). It is a huge market in CA, tons of great lenders out here. But with anything, make sure to do your due diligence. Unfortunately, there is a little bit of a negative connotation surround Hard Money still to this day. There are a few scammers and unethical people in the hard money world. Stick to the bigger companies that have a lot of experience with a great track record. Make sure to ask about their foreclosure processes, how that affects the backend investors, how often this happens, what the average annual ROI is for the back end investors, etc. 9.5% annual ROI for an investor in a HML fund is very doable and very passive.

Good luck!

No upfront fees ever. No 100% LTV funding ever. These two things are both major red flags and almost certainly a scam or a badly run business that will certainly default.