All Forum Posts by: Ben Stoodley

@Kevin Hill great post! Definitely agree. Most lenders aren’t even lending to first timers and that’s why. COVID or not, real estate prices were bound to decline, its cyclical. There are many people enjoying this late surge in pricing, but it will change, and you need to PLAN for the worst case scenario. Will it be terrible? No, all signs point to a small down turn. But, if you’re not being cautious about your projections , you shouldn’t be investing. And one bad deal at the beginning of your investing career can ruin you. Warren Buffet is known for saying 9999 no’s for every 1 yes. Great time to exercise that diligence in my opinion.

@Benj Ecker as some others already mentioned, I would not advise spending all of your savings on this next property. Most all lenders won’t like that given it shows little ability to service the loan, especially given so many uncertainties in this pandemic economy we are still coming out of. Here’s a few options I’d suggest:

1. Find a partner with another $75k to put in. You do all the work finding the deals, managing the projects etc. Look for deals that you get under market and can add lots of value to. Then sell. We are at the height of the market so if you can capture these prices great. If not, then refi and hold - the BRRRR method. This way you can get your $25-$35k back out after refi and continue on with this partner.

2. Invest your $25k passively in a strong project with a trusted source. I would still suggest having an exit strategy (refi or sell) to recapture your investment within 6-12 months.

My suggestions are based off FIRST multiplying your capital a bit more, so that when you do your own projects, you have more capital and experience to set yourself up for success. Hope this helps!

Hi @Brook Rieman - since you will need all the cash ready to go for a sheriffs sale, you're right, you wouldn't be able to attach their money as a lien on the property upfront and prior to closing. However, you could attach a lien for their capital after you own the property, so they would only be unsecured for a few days max. You could even write a JV Agreement with them, outlining the uses of the funds and the responsibilities of the operator. This way, you don't have to bring your asset into the mix, which would get messier. I would only consider putting a lien on your other property if you really trust these people. Additionally, you could set up an entity just for this next sheriffs sale project, with your friends capital invested and equity in the entity given to them in return. You can always add or remove other members in the future, or start separate entities to keep different investors and projects together. I would definitely consult with a cpa and attorney for this process. Hope this helps!

@Joshua Raley most hard money lenders will be equally concerned with overall liquidity. For example, if you're buying a $100k house and putting $40k into it, if you can show $40k or so liquid for down payment, interest payments, closing costs, etc., then you may still be approved. Hard money lenders are more focused on the asset itself, the equity in the deal, then the experience of the borrower and their financial strength. Hope this helps. 

Hey @Charles Patrick II if you are just getting going, I always suggest taking advantage of the bank/conventional loans when you can. They will always be cheaper than hard money. However, they don't work for many deals either due to Owner Occupancy rules or Timing. Hard money is much faster and easier, it is asset based and typically can close within 7 days, but at a much higher rate than bank financing. Banks have numerous more requirements and often times won't lend on distressed properties. But if you have the time and opportunity to take advantage of the bank rates, like if it's a live-in flip or "house hacking", then get the cheap money while you can! Once it comes to scaling your business to more than 1-2 per year, hard money makes the most sense. Hard money offers some cheaper rental loans nowadays too, 10/1 arm and 30 year fixed rental loans starting in the 6% range typically, just FYI. 

Hey @Lauren D. from what I have heard, the rehab process is much more difficult with a Fannie/Freddie rehab loan. I would take advantage of these one some deals that you have plenty of time with (live-in flip, for example). All of these government loans are great due to high LTV and low rates, but they are very difficult to use in this industry due to slow processing and endless requirements/paperwork. It still comes down to what I tell all my clients - if you can make a bank loan work, do it. Hard/private money will always be here for the rest :-)

Hey @Adam Stroik - would be happy to take a look at your project, love when they're right here in town! Sent you an email as well. You can submit deals directly at www.bestlendingco.com/apply Thanks!

Hey @John Hunt the BRRRR strategy is so popular for a reason, its the best of both worlds! I would highly recommend getting into real estate investing as early as possible, like you are, so hats off to you there! Working with hard money lenders is an essential piece to scaling your business, but it may depend on when/where/how you are planning to invest.

Post-COVID lending is a bit different than pre-COVID lending for both private and hard money lenders (essentially the same thing). All lenders are requiring a certain amount of equity in their loans, aka, max loans of about 75% of purchase price + 100% rehab costs. The 25% down required by the borrower is often times required to be their own cash, but some lenders are allowing gap funders right now. There will be restrictions here, such as CLTV not to exceed 80% ARV, for example. So that means you may still have to bring some cash to the table even with a gap lender. Most hard money lenders don't allow gap lenders right now though, especially for first timers.

The first deal is always your hardest. Even before COVID made getting a loan even harder, the first couple are always harder than the rest. My suggestion is to find an experienced partner for your first few deals. Yes you split the equity with them, but, they will save you a ton of time and money throughout the rest of the project. For example, if you only have a small amount of capital to invest, and you dump it into your first deal, one bad deal can wipe you out completely. The odds of this happening are much higher to a first time investor, which is why its so important to partner with an experienced person, in my opinion. If you find the deal, manage the deal (find the hard money, manage the construction, etc), then most capital partners will put up the rest of the money and let you handle the majority. This is a great hands on way to learn, you still profit, but you learn the ways from successful investors. 

Just my 2 cents. Unless you have truly private INDIVIDUAL investors (friends/family), it will be very hard to finance your first deal right now, but not impossible. Typically, local lenders will be your most understanding/flexible/willing to work. Best of luck to you!

Hey @Jason T. - there are no real laws here for private lenders. I've seen most lenders offer some sort of forbearances, although most of those state mandated time periods are coming to an end, so things are going to begin to shift here. In my experience, private lenders have required the borrowers to show proof of hardship to grant the forbearance on a current loan. 

For a new fix n flip acquisition loan, having the forbearance noted on your government loans wouldn't be a deal breaker to most lenders IF there is a good explanation. I agree, most investors and companies took advantage of all the government bailouts, so it isn't a deal breaker necessarily. I would just make sure your current and future cash flow exceeds all the lenders requirements, as most LTVs have decreased along with rates increasing. Given the right deal, overall situation - including borrowers financial strength and REO, you should be able to continue getting a hard money loan.

@Chris Gawlik There is no right time to invest. People who wait for the right time to jump in, never jump in. Real estate has proven it's resiliency to the current economic challenges and will continue to do so. Of course you will see some pricing correction with the large amounts of unemployed and mortgage forbearances. However, if you look behind those two numbers, there is a large percentage that won't end up as home buyers and forbearances that don't end up as foreclosures. The few that do end up as foreclosures will actually help the investing community here. Inventory has been so tight for years, COVID made the inventory even tighter, so investors should be positioned well to take advantage of these opportunities. Don't wait, my opinion. An old mentor told me you make all your money on the purchase, and I think that has proven correct throughout my career. Either way, best of luck!