All Forum Posts by: Ben Stoodley

@Jon Anderson everything @Kyle J. said is on point. All the important things were mentioned there including the usury laws and needing a broker. It’ll depend also on where the fix n flip property is located as each state has different lending laws.

It’s such a small amount , my questions would be more geared toward the borrower. Does the borrower have a chunk of money in themselves? Or are you one of many private investors in this deal? Or is this a small priced deal where $20k covers the down payment?

If you know and trust the borrower than most of this will be fine. Borrowers get in pinches and need money to finish deals etc. But experienced borrowers wouldn’t normally be offering this type of return, in my opinion.

@Megan Winterberg I went through a similar analysis last year trying to decide on which market to buy in. Here are some questions that helped me

1. How much money do you have to put down? Loans for MF have changed a bit lately, but they’re still pretty attractive. I see most maxing out at 80-85% LTC when there are renovations planned.

2. This in turn will decide how big of an apartment building you can afford. Every market is different. The same deposit will be able to get 100 units in one market and 20 in another. For me, I wanted to MAX the amount of units, without falling into too low valued areas. Keeping $50k/unit as a min helped set in stone how many units I could afford per market.

3. Coinciding with step 2 is deciding on the market. There’s already been great responses here and in other posts. I would say picking the market depends on

- landlord friendly areas

- area where you have the best team with boots on the ground

- maximizes you’re unit/$

- deals in class C and B buildings

- strong JOB market for the future

- strong median salary vs market rents

These questions or points helped narrow down the search for me. I was only looking for apartments that had deferred maintenance and high expenses and were family owned. I found the most upside potential here. Hope this helps.

Hey @Simon Obas it all depends on your current financial situation. I urge all my clients to seek out and take advantage of all bank financing when possible, you will save a lot of money. If the property doesn't need much renovation, and you're buying it at market value-ish, than you're probably looking at 65-75% LTV loans.

Is the property a rental? Most rental loans from hard money lenders are based off the Rent, DSCR, and your Credit. These rates are usually in the 6-7% range with a 3 year prepay and 30 year term.

Alternatively, if you need to close super fast, than hard/private money bridge is best. You'll be paying 9-12% interest, 12 month term with no prepay. Any lender should be able to do this quickly for you.

So yes its completely normal for people to use hard money for the acquisition of a property to then refi later - essentially BRRRR without the rehab. I see this most often used as as negotiating tactic with the seller aka "I can close cash in 5 days if you accept this offer" and then grab your private lender and go to work. Seasoning and stabilizing then approves over the next few months and a refi into a bank loan should be doable.

@Mindy Jensen free time? What’s that? No I’m kidding. 5 years ago I would’ve been serious. I believe “time off” is more important than “time on”. Without the proper rest/recovery, we can’t perform at our max! I make time for certain recovery activities everyday and larger breaks as often as possible.

Everyday hobbies:

1. Meditate and journal everyday. This is a must. Mediation can literally be thought of as a workout for your brain, teaching it to focus by letting go of the minutiae.

2. Long hikes with my dogs. This checks multiple boxes in one. DOG time and NATURE time and AUDIBLE time (books and podcasts)

3. Weight Training or Boxing. Fitness has long been the foundation of my life. The Releasing of the endorphins provides instant mental and physical energy that lasts throughout the day.

4. COFFEE. I love coffee. It’s my daily treat. I love trying new places as well as perfecting my at home latte game.

5. Family time. My gf and I have been living together for a couple years. Quarantine has changed a lot. We decided to dress up and have “date night” once per week no matter what, even if that means at home given Covid restrictions. It’s important to setup a special time to CONNECT with your family. For me that’s my gf and my 2 boxers.

Other hobbies

1. Snowboarding

2. Kiteboarding

3. Basketball

4. Hiking/Camping (Zion is scheduled next!!)

5. Travel anywhere new

So happy to see this thread get some love! I always am preaching about diversifying your time, your learning, your hobbies. We grow more when learning about different topics and perspectives, it’s why athletes use “cross training” during the off season. We can’t possibly be at a constant 10, we need to be at a constant 2-4, ready to turn up to 10 when needed. It’s not about making a million dollars TODAY, it’s about how much you change the world, and leave your family and legacy. Life is all about balance!!

@Xavian Rimmer finding a great lender depends on a few things:

-where is the property located?

-what type of asset?

-what is the loan type - flip, rental, long term?

Depending on the above, you may want to go small, private lender. There’s pros and cons with every type of lender. What’s most important , in my opinion, is finding a relation shaped based lender. Trust is important. Rates will come down as you develop a relationship. So call a few lenders and get to know them a bit. All the rates are going to be about the same in the end, you should enjoy and trust your lender(s).

Good luck!

Hey @Mike Wilkins those are some good questions. To best answer, I would need to know more about:

- Amount of cash to lend

- Goals for ROI

- Experience as a lender/real estate investor/agent/broker etc.

- Other financial constraints like income needed, or is this completely on the side, etc.

But in general, typical private money rates would look like:

- 8-12% interest rate

- 2-3% origination

- $500-$1500 closing costs

- 12 month term, no prepay, extensions available

- 80% of purchase price + 100% of rehab max LTV

If you were to do an equity split, there are multiple ways to do this. However, it would again depend on knowing more information about the project, the borrower, and your goals. You could provide them with a 1st TD loan like above, then a 2nd TD at a higher interest rate, or, a 1st TD + a JV agreement to do the rest for a split of the equity. Alternatively, you could do the entire project with the investor, putting up the capital, splitting the equity. You would definitely want to be part of the Operating Agreement for the entity in this scenario, with equity in the entity, and attach a lien as well for the principal balance.

Hope this helps! Feel free to message me for more info or to further examine the project. 

Best of luck.

@Brandon Beardt great foundation to begin investing with! I had a mentor when I started and he would constantly say... "dont worry about the money, worry about learning." While house hacking is a FANTASTIC way to start, I don't believe it's your fastest way to start. I was in your position as well, but San Diego four plexes were too expensive for my $50k to take advantage of with the FHA loans. If you spend all your money on one long term play, it'll be a very smart, but slow process. My suggestion would be to partner up with someone local to LA and learn from them. Put your $50k with them in 1-2 projects this year. Do all the work for them or with them. Learn learn learn. If you have income - from selling RE like you mentioned or other - then I would continue stacking that capital. We are at the HEIGHT of the market right now, don't rush to buy.

Hi @Jason Regan as mentioned above, COVID tightened up ALL lenders criteria, making the financing approval process much more difficult, especially for newbies. Most lenders required 4-6 completed projects in experience. Some of this is loosening up. I don't know of many lenders allowing for newbies, but a few are now. I have done a couple loans to newbies recently, but it wasn't easy. If you have good RE experience like you do, along with some good capital to put down as "skin in the game" , my personal opinion is that I would probably try to make it work. 

I know a lot of people preach about using "OPM" or Other People's Money, but as a first timer I highly suggest the opposite. Putting your money where your mouth is goes a long way for lenders trying to make a decision on your project. That's why I always suggest Partnering up with someone. If that partner has experience and credit/capital, they will help your entity qualify for better rates/terms. Hence, allowing for more profit and more learning for you. 

Alternatively, next best to a partner would be a JV partner or private investor/silent investor. Along with the other tighter requirements, no lenders I know of are allowing for 2nd TD loans right now, or gap lenders. So your partner/gap lender/whoever can NOT attach a 2nd position lien to the property, behind your hard money first. Therefore, the partner/investor needs to have a JV agreement with you, outside of escrow/title, outlining the responsibilities of the investment. This extra capital should significantly help your chances of getting a loan.

The lenders that DO allow for a first timer loan, will likely have LOWER LTVs and HIGHER RATES, along with HIGH LIQUIDITY requirements. Please don't get discouraged or take it personally, lenders are investors too, always looking for ways to mitigate risk. The first deal is always your hardest! Focus on finding solid deals, because the better the deal, the more likely the lender will make it work for you! 

@Andrew Freed I think you're only option will be to partner with someone that has the money. They can deposit into your account , you guys have an outside JV agreement, but the property, stabilize, then refinance your partner out. Treat him like your lender. I don't think any lender will be allowed, when you say "private lender" , I assume you mean a loan to you with a lien on the property. Liens won't be allowed prior to close. But a private JV style partner should get around that - just make sure there are no "seasoning " or other large deposit requirements from the seller/bank. They may require an explanation of any large deposits, So, be prepared to go through all the hoops. Nothing worth having comes easy! Good luck!

@Austin McAnena it depends on your current financial position and investing goals. I see you're working full time for what sounds like a cool company that's could do great in this environment , so if you plan to stay full time for the next few years AND you're making decent money, I say go LONG TERM. Your decision isn't final, you can always change after current leases expire. Short term is under a lot of heat with tons of taxes like mentioned earlier. It may make sense, but, you would need to know every detail about those laws. For example, some of those areas near Coachella can get enough STR income in 1-2 weekends to cover annual mortgage ! If your subject falls into that category (and the laws haven't changed the ability to do this during Coachella and Country Fest) then I would seriously consider that. This is a unique situation available due to those concerts. BUT, COVID could really effect those type of concerts negatively.

Another reason to go long term is that most lenders will underwrite the deal based on long term rents. So the value and overall project analysis should be done on LONG TERM rental income regardless. Any STR plays can be handled down the road. Hope this helps !