All Forum Posts by: Brant Jones

@Joseph M'Mwirichia, the rehab will be funded by a separate private lender, not the HML.

How does it work if the HML has a minimum loan amount of $50k, but putting 10% down in this case will put our loan amount under the 50k threshold?

Do they typically make an exception, or not require a down payment?

Hey BP! I am looking at hard money as a way to fund my next BRRRR deal. Although I am familiar with conventional and personal loans, hard money is something I do not fully understand yet and would welcome any help in making sense of my numbers.

Deal by the numbers...

Duplex (2/1 each side)
Purchase price: $51,000
Appraised value: $62,000
Rehab: $15,000
Loan to Cost (LTC): $66,000
ARV: $82,000

Hard money lender offering the following terms:

75% of LTC... assuming $49,500???
100% of construction costs
65% of LTARV... assuming $53,300???
10.99% IO on full loan balance for 13 months
2 points ($990), plus 6-months IO ($2,571.66) in reserves required

I am planning to use private money for the $15k rehab.

If the HML is willing to fund 75% LTC, do I simply need to bring the balance, plus points, escrow reserves, closing costs, to close the deal?

Assuming:....

$49,500 max LTC
------------------------------
$1,500 difference between purchase price and 75% LTC
$990 points
$2,571.66 IO pmts (6 mos.)
$2,500 closing costs
------------------------------
Cash to close: $7,561.66

Does this look right or am I missing something?

Are HML transactions considered cash purchases for the purpose of refinancing to a Freddie/Fannie loan in six months?

Thanks in advance for your help!

"April's sales total was down 25.6 percent from the 373,070 level in March and down 30.1 percent from a year ago. It was the first time home sales dropped below the 300,000 level since March 2008, and the month-to-month drop was the largest since at least 1979, when C.A.R. began tracking this data. Additionally, the year-over-year decline was the first double-digit loss in 15 months and the largest decrease since December 2007."

Read the full article, here: https://markets.businessinside...

Curious if everyone feels this is an isolated decline, or if your markets are seeing similar declines?

National rent control? No thank you.

If the property is a value add opportunity, I would negotiate a much lower down payment, closer to 10%, with a higher interest rate (8 - 12%), then use the capital to improve the property so you can do a cash out refi, and take out the seller financing within 12 months (or sooner). The seller benefits from getting full asking price (or close to it) and a higher return during your rehab/holding period. Run the numbers and the math will tell you what to do.

To deal with insurance I read that a Land Trust can be used to name the seller as the beneficiary, and the buyer as the trustee, with power to deal with all aspects of the property, including insurance. A new policy naming both the land trust beneficiary and trustee(s) as the policy loss payees satisfies most lender requirements. Not having done this yet, I am curious to hear from someone like @Jay Hinrichs on how this has been done in real life.

Welcome @Angela Pynenberg! We invest in SE Wisconsin and share your passion for providing clean, affordable housing to our hard working, lower income tenants. You will definitely learn a lot through the BP community!

Welcome @Ricky Serna! We also invest in small multi-family properties in SE Wisconsin. Sounds like you are on the right track toward success!

Expecting 100% by the end of the week. We are 80% collected as of today, and the one tenant claiming hardship has committed to paying by Saturday.

Our property manager has done a great job working with us and our tenants, but I agree that it is still very early and there may be rougher waters ahead based on the unemployment numbers that came out today. We are being proactive in communicating with our tenants to let us know as soon as possible if they are impacted so we can work with them.

@Marcus Auerbach, great perspective!

The lease option is interesting, but I worry since there are already tenants in place how that would muddy the waters, legally, i.e. which "tenant" would the seller be evicting if things went sideways.

The hard money loan is an option, just looking at path of least resistance given the current state of affairs and potential for tenants losing their jobs, non-payment of rent, etc. The seller's current mortgage terms are more attractive than hard money terms, providing us more runway to carry the property if necessary.