All Forum Posts by: Ben Stoodley

@Anthony Minutoli I’ve answered this question a few times on BP to fellow private lenders looking to enter the space. I think there’s no better time than now! I’d be happy to discuss further but here are some tips:

1. Learn the laws. The best attorney in the industry in my opinion is Geraci, they cover most states and laws change per state. If you’re focused here in CA - make sure you have your licenses and insurances. You can lend in CA if you’re licenses through either DRE, NMLS, or CFL

2. Know your borrowers. I would recommend starting small with people you’ve worked with or can trust. Always require skin in the game by keeping conservative LTVs. Price based off risk and experience and financials.

3. Provide a solid product. Most private lenders don’t offer a myriad of loan options due to the fact they are private not institutional/corporate. You’re looking at the same things as investors so the more scattered your focus the less quality products / processes. There’s plenty of business out there. Pick a product that suits the types of projects you feel comfortable taking over.

Happy to connect and discuss more.

Good luck!!

@Michael Bull welcome to SD! I’d be happy to recommend a few. I’ve worked with many of them in the past. There are numerous good private lenders that are fast and easy to work with. Depends on what you’re looking for specifically in the loans. Let me know!

Hey @Joshua Hoffman most HML are lending to first timers now, this stopped during COVID but most lenders have come back down to normal on this. However, experience does effect your pricing the hardest. So, very experienced borrowers can get rates near 8% interest and 1.5% origination. First timers can pay as much as 12% interest and 3% origination. Credit and liquidity play into most lenders decision on pricing as well. In addition to higher pricing you should expect to put down a higher downpayment. Most lenders will reduce the purchase LTV and LTARV for first timers. For example, experience borrowers can get 80-85% of purchase price + 100% of rehab, not to exceed 75% LTARV. For first timers, this will likely be maxed at 75% of purchase price + 100% of rehab, not to exceed 65% LTARV. Still very doable terms though, I have seen numerous deals work like this post covid.

Another important risk factor to consider in BRRRR investing is the exit strategy. If refinancing with a conventional bank, make sure you are preapproved at a rate and LTV that makes sense. This isn't my specialty (I do private lending) but I've heard these LTVs decreased, making it harder to cash out the hard/private loan + your invested cash.

Hope this helps! 

@Gaby Liu hate to hear these stories but they are ALL too frequent. I'm so sorry you had to go through this mess. Ive had similar issues managing flips in VA from CA. Even with trusted feet on the ground and trusted/known contractors, we went through 4. And it was a $20k job!

The book The Emyth explains in a very understandable way why this happens so much in our industry. It doesn’t take much to be a business owner... scamming is never cool, but more frequently it’s just poor business ethics and commitment. Becoming a business owner is easy. Becoming a PROFESSIONAL business owner requires management skills, talent and entrepreneurial vision. Typically only gained through LOTS of experience (verifiable).

I say that to say this - Keep your head up! Thanks for sharing as it’s helpful feedback for even the parties involved, as that’s the only way they’ll improve (or change courses)! Good luck !

Hi @Kevin Moore , there are a few private lenders open to new construction, at the right LTV. Do you have experience with this type of project and what is the dollar cost to build VS finished value? If you have the right structure - GC, financing, exit - then you should be able to get this done. I'll send you a pm as well. Good luck!

@Andrew Freed Ive closes deals through auction.com before. It’s been a while but as you mentioned they typically have 30 day closes. Most lenders don’t need this long all they need is title insurance (and other lender specific docs). So in the past we would just confirm a normal closing transaction with Title, and if so, we were good to go. You should be fine. Best of luck!

@Jenny Liao It'll be hard but not impossible I suppose. Some investors can get private investors to invest their capital into a JV agreement and entity bank account. That money covers all down payment , holding, and financing costs. Then the rest is covered by a hard money loan. But if you plan to get a rental, make sure you have an exit strategy for the high interest loan and/or private investors.

@Daujenae Harps many lenders stopped lending in March and April. Most came back through June through August. Few remained lending throughout. As mentioned previously, if you have a strong deal, you should always be able to find the money to fund it. There’s a ton of money out there right now and even with a “crash” , these people and companies will still have a ton of money to get a yield on. It will just be a more conservative yield, until things look better. Hope this helps. Good luck !

@Brandon Ribeiro I would suggest to set up an entity - LLC or S Corp typically. There are numerous ways to structure as previously mentioned, which is why your CPA would need to handle. Your doctor friend could do a loan to the entity plus have a a JV agreement for the 50/50 profit split. That keeps the entity 100% yours and front end branding in your control. If you're the face of the biz, then it's a good idea to keep in mind the long term value of having your own brand. But if you plan to stick with the doctor long term, then I would just have him in the entity with you. 50/50 owners of the entity. Then try to convince him to take the 10% loan part out of the equation.

Either way is good, just get everything in writing, and have clear exit plan. Meaning, the entity docs should be called DISagreement Docs because you only will need them if there is a disagreement. So what’s important is that if you partner with anyone in an entity you want to have clear steps to follow if the entity is to break up , someone leave, etc. Sometimes these are covered in the Operating Agreement or By Laws. Good luck!

@Paul Welden you're 100% correct, I wasn't clear at all, what I was referring to was the max REHAB amount. And I'm sure these numbers also vary per county as well. Good catch.