All Forum Posts by: Ben Stoodley

Hi @Scott Freer

@Scott Freer

I agree with@Account Closed in thinking you should be able to do both deals with what capital you have ($60k) + a HML loan. Not sure of the industry averages in PA, but here in CA 80% of the Purchase + 100% of the Rehab costs is not an uncommon Fix n Flip loan.... or in other words about a 65-70% ARV loan. That $60k should cover your borrower's balance.

Using 65%ARV as a standard max loan, that will gross you $215k for both properties, purchases + rehabs on both = $237k. Seems like this should work fine for you if you wanted to work with a HML.

Good luck!

Ben

Hi@Ned Atkins

Welcome to BP and the wonderful RE Investing industry! You are in a great market there in Austin! I have a great client of mine that has been bringing us GREAT deals in Austin, we have financed them all without hesitation. So, I think you should be able to find good deals without too much trouble (it's never easy, anywhere haha).

I might suggest proceeding down all avenues simultaneously. You should always be looking for good deals. Between you, your REALTOR, friends/family and other wholesalers, I am sure you will be coming across some good deals. Getting these good ones under contract first is always most important. Without a deal, a HML won't be able to quote you any financing terms and a new partner wouldn't be as interested in teaming up. If you had a deal with the basics spelled out, future partners would be able to see exactly what you're bringing to the table and may be more willing to jump in, and as you know most all HML are asset based so they would like to see the deal as well.

So, while you're constantly searching for deals, you can vet some HML and partners at the same time. This would be my approach! Let me know if you have any questions on the financing end of the transaction or underwriting deals.

Good luck!

Ben

Hi @Elias Meek

Sounds like your off to a good start and realize having a financial partner on your side is a good first move. Although hard money lenders typically are asset based, it is good to find a trustworthy, reliable and knowledgeable one that will stick with you for the long run, just as the other two comments have eluded to. When looking for one, I would value this characteristic highly. Lenders that want to build a long term business relationship will likely prove to be a good lender.

• Rates/Terms - very easy to compare, usually stated on their websites. Just make sure to ask what the variables are, what the ranges are determined from.
• Junk Fees - always ask specifically what all the fees associated with closing the loan are. Average junk fees in CA are around $3k in my experience, which is almost completely unnecessary.  
• DIRECT Lenders - this is my most likely my #1 tip, make sure you know whether the lender is the actual check writer or not. Ask them how long it takes to close, it should be less than 5 days if the Lender is truly Direct. You don't want to be left hanging in Escrow because your lender doesn't have the funds or decided to fund other investments last minute.

Hope this helps you out a little. If you have any questions, feel free to let me know.

Good Luck!

Ben

Yes @Rob Cee we look into all points you mentioned regarding the background experience and borrowing strength of the contractor. 

Yes, permits would be needed before draws were sent.

No, we handle all construction draw requests in house. 

Yes, we require an ARV appraisal to be done prior to any funding of the loan.

Hi @Danielle Hammond,

Yes, unfortunately there are a lot of scam artists out there in this industry. If you'd like to send me details on the property,  I will take a look at it. We don't typically lend in Michigan, but if the margins are as good as you say I'm sure my company or some of our affiliates will be interested. Maybe I can at least point you in the right direction. Contact info below. Let me know if you have any questions.

Thanks!

Ben

Hi @Jason Baehr,

You're right, there can be some great deals at the courthouse and the hardest part is paying full cash at time of winning bid. Since all the parties know this, they typically have entire teams of people inspecting the property, running numbers, researching properties before the auction starts, etc. So these type of properties can be home runs but are also hugely risky.

For this reason, most lenders will not lend on this type of transaction because they require Title Insurance on their deals. This leaves you with two options, pay full cash and then refi out the next day, or, raise money from private investors like yourself, pool the money together, make sure to do your due diligence and buy properties in full at the courthouse steps. 

Also, there are auctions that do not require full payment at time of winning big. These typical auctions are held much like a normal transaction with Title and Escrow. Hard money lenders shouldn't have any problem lending on these type of sales. 

Best of luck!

Ben

Hi @Rob Cee

As a lender, we would mainly be concerned with the LTV of the loan, timeline and schedule of draws. It is essentially a construction loan, most lenders like ourselves would need to be in first position, and there would need to be some value in the land as collateral against the loan. Assuming there is equity in the land, financing 100% of the construction usually is very doable, as long as the loan is less than the lender's max LTV % vs the sales price of the total development. For example, if it costs $500k to build and the exit sales price was $1,000,000, or a 50% LTV, which would meet most lender's criteria for maximum LTV %.

Hope this helps. Good Luck!

Ben

Hi Karen,

I am going to send you a couple people with a not-so-common type of deal over your way right now. Their names are Kevin and Kathy. 

Good luck!

Ben

Hi @Krystan Keyes

Welcome to BP! You have obviously stumbled upon the best online community for RE Investors. You'll find everything you need here. So that's a great first step!

1. In my experience, there is a large range depending on the area, most I've personally been involved with on the financing end have been around a 7-8 cap.

2. Yes, most of us lenders will lend on these type of properties. Every lender is different and will likely have different max LTV loan amounts they'll lend on a commercial property. If I had to give it a number, I would say about 65% LTV is pretty common. Once again, every lender has different processes but it should generally be about the same. I'd assume some companies will require more financial documents for approval, showing you have a steady income and can make payments on a large loan like this. Max loan amounts are different per lender and sometimes per deal.

Hope this helps! Feel free to contact me with more questions.

Good Luck,

Ben 

Hi @Jeffrey Hayes,

I have posted a few articles helping members in vetting HMLs as well, feel free to refer to them. Here are my basic points of importance:

• Interest/Points: easiest part to compare, pretty straight forward, start here by comparing all their rates and ask what their main determining factors are for selecting what the rates would be, usually those factors are term and LTV
• PrePayment Penalty: there should never be any prepayment penalty with HML, most do not charge one but always be sure to ask if there is a minimum amount of paid interest
• Junk Fees: often times these are not spoken about until they appear on the HUD. They are completely unnecessary. In California where I do most of my lending, this generally amounts to about $3k per deal. They are names processing fees, rehab draw fees, inspection fees, etc. All can be eliminated
• DIRECT Lenders: I always strongly suggest to work with direct lenders because it minimizes the risk of the financing falling through due to back-end investors spending their money elsewhere. Ask your prospective lender how long it takes them to close and if they are the actual check writer. They should be able to close within 3 - 5 days.
• Long Term Relationship: lenders are your financial partner, both the HML and borrower should view it this way. Lenders should want to help build your business and remain your financing source. Ask if the rates can be negotiated after you have proven yourself a little
• Asset Based: most all HML as asset based, with no minimum credit score. All the security is in the project itself.

Hope this helps, best of luck with your search and feel free to contact me at anytime.

Best,

Ben Stoodley