All Forum Posts by: Cameron Rockwell

Investment Info:

Townhouse buy & hold investment in Virginia Beach.

Purchase price: $155,000
Cash invested: $1,100

Just moved out of this house as a primary residence. House is 3 bedroom 2 and a half bath with 1428 square feet. I rent out all three bedrooms separately and manage myself. With PITI, Maint, Capex, and vacancy I cash flow $445 a month. Budgeting for management still puts me at $245 a month in cash flow.

@Agustin Cruz  I wouldn't say 5% is common. It all varies on the situation your private lender is in. If he is used to getting a .75% return on his money in the bank then 5% would provide some value for him. However if you have an investor with diversified assets 5% might not be enough. The most important thing is making sure the agreement benefits both sides. 5% is typically pretty low for private money lenders in my opinion.  

@Agustin Cruz I planned to keep it as a long term buy and hold so I just split up the loan amount over 5 years and paid him the principal and interest. 

@Reta Williamson @Agustin Cruz 

Good Morning I'd be happy to answer some of your questions. 

1. Yes I have partnered up with my grandfather to fund the down payment for an investment loan. He was only getting about .75% interest in his bank account so I got him a 5% interest rate for a 20,000 dollar loan over 5 years. It was important to find a deal where I could still cash flow after that loan was payed off monthly. I sold him on the deal by providing a bigger pockets report with what the numbers looked like. He saw that I was still going to cash flow $100 after both the mortgage and his loan were payed out. I budgeted very conservatively.(5% maintenance 5% vacancy 8% capex% 11% property management) I actually raise my own private money with anyone I happen to network with and money comes up. However if you are doing this you need to make sure you can guarantee that money with interest so some experience is recommended. Your private money lender is the most important person to pay besides the bank so if you have to take a loss to pay them so be it. 

2. Personally my grandfather and I just have a signed promissory note because we do business a lot. Most people would recommend giving them a second lien position on the property. That is how I have usually seen it done. If you are getting the entire purchase price funded by a private lender they should receive a first lien position so that they can take the property if you stop paying. 

3. Never combined private money and hard money but I would be careful as a new investor. Over leveraging on a deal can be a good thing as long as you know what you are doing. I would get some experience using one and then using the other and then try to be creative. Just because you can invest in real estate with no/low money down doesn't mean you shouldn't have money saved up in case things go bad. 

4. I have personally never had a private money deal go wrong but I have seen it happen plenty of times. Most cases of failure I have seen involve not doing an analysis properly. You cant cheat the numbers. Especially if you are using Other peoples money you need to be even more careful as a small analysis mistake can not only cost you cash but also credibility as an investor. 

I would be careful and find a mentor in your local area before diving into highly leveraged strategies. Also, have some money saved to bail yourself out. Using other peoples money adds more risk but if you have the knowledge and experience to mitigate it they can all be great strategies. Hope this helps and let me know if you have any other questions.  

@Ramon Wilson I got approved for a 25% down 3.75% interest rate for 220,000. No points were charged however I did not actually go through with this loan. I just got pre-approved for a primary residence and an investment property just in case i found something I could not purchase as a primary residence. Yeah I would say 3 points up front is a lot. Continue shopping around and maybe you can get something better. I used CF mortgage here in Virginia beach so it was a local bank. If you have any other questions let me know!

@Brock Pellerin Make sure you calculate the amount of equity you will have correctly. Keep in mind most of the earlier years of a mortgage you are paying mostly interest so it's not going to be quite that much equity unless you specifically pay down principal. But even then I'm pretty sure most lenders won't let you do that. I would just make sure that a possibility before you assume you can get 100k worth of equity in 2-3 years.  

@Anthony DeMichael You would be surprised most of the time the local HMLs are the way to go. Not to say a big nation wide company is bad the local ones just have way more market knowledge and can really help you out. 

@Jared Sandler Attached is a bigger pockets thread I think you could benefit from. I talk about the difference between hard and private money in detail. Let me know if it helps or you have any there questions. 

https://www.biggerpockets.com/...

@Edwin Valdovinos Like I said before the deal is the most important. If the deal is good enough any lender should be willing to lend on it. Most lenders have a newbie interest rate which may be a little higher but if the deal is good enough, and you have a good network to handle everything, there will still be lots of profit in it for both if you. 

@Edwin Valdovinos Yeah that sounds like a great plan and a solid partnership! I'm excited for you guys. Just understand that your Hard money lender is on your team and wants you to succeed as well. Make sure you have all your numbers sorted out before going to them. They are probably going to ask for a CMA, a repair budget and a copy of the contract so they can verify it is actually a good deal. Make sure the Loan to Value is less then 70% and if its even lower than that you might be able to get a better rate (less risk). It already sounds like you're getting another estimate on your rehab budget which is good. As long as you be smart and keep working together it sounds like you guys will work through this as a team. Good Luck in the future and feel free to reach out if you have any other questions.