All Forum Posts by: Daniel Molina

@Damien G. I agree with a lot that has been shared on here already. To do a blanket or portfolio loan you typically need 5 properties or more. I know a few lenders who can do a smaller unit count but then the out-of-state issue may play a factor. 

Ultimately, I would suggest you either go conventional or do a short term bridge loan and then refi with a specialized lender once the dust settles with the COVID pandemic and you get many more options. To clarify, use a private or HML lender to do a 1 year loan, this will free up your VA and remove those loans off your credit report. Purchase the house using the VA with the state you are in and refi the other two later down the road. Feel free to PM me if you need some additional guidance.

@Christian Walker are you still looking to fund this deal? I can give you a few that are still lending.

@Jay Hinrichs Great info on here. A lot of what you are sharing is accurate. Longer term paper has seen a big tick in rates because of the secondary markets. I will note that plenty of HMLs are still taking new clients or light experience. The community is trying to help those who are stuck with contracts that could not fund. 

The market was driven way too low and too high of leverage which is why so many closed up so quickly. It was an unfortunate sight; however, it really drives home the importance of share factual data and not misinformation driven my hysteria. 

Rates have gone up, leverage on purchases can still be found at 75% LTV. Additional leverage can be provided for rehab covering up to 100% of the budget. Lenders are 100% taking new clients whether experienced or not. The best thing one can do is prepare themselves for a deeper review of their plan and strategy including an exit.

Cash-outs are still occurring but those have the much tight leveraging. Unfortunately, some bad apples have played the 'strategic default' hand and it has made everyone super cautious on a C/O refi. 

Wholesalers will definitely feel a pinch and they should be prepared to either take less per deal or save all of it by doing a double close.Typically most will honor a purchase price so a double close can solve that issue. 

I would see if you can get a bridge loan. The late payment is never a good factor for lenders so make sure you have a letter explaining the situation. Also see how flexible the current lender is, maybe make them current and renegotiate current terms. 

Hi @Lisa Eckman great questions and the hard thing is that everyone is going to offer a different product. Some true private money guys may even adjust per loan based on the client so I would expect a lot of data. Here is my $0.02:

I have not seen a HML issued without points I typically see anywhere from 1-4 points. Note that I have NOT see 1 point in recent times with the advent of COVID

No, there are actual costs associated with originating a loan and the borrower should expect to cover/pay for those fees. 

I know of HML/PMLs that are willing to offer long term loans...I am one of them.

And if its a short term loan, then points are probably more important than the interest rate ($ upfront rather than over time). As an example: 0 points and 25% interest vs. 3 points and 10% interest. I know it varies, but what is the norm? And where is the tipping point between points vs. interest (which is better)? This varies based on how the lender is capitalized. Points are always good since they are upfront money. If there is no pre-payment on a term then there cannot be a guarantee that your 25% rate gets paid out passed a month or 2. Conversely, if you are leveraging the money to lend and you are having to pay a premium then sure rate matters since you want to make the largest spread. So say i borrow from you at 4 % i want to lend at 9% so i can pay you back plus make a 5% yield. every month on interest fees. Lastly, you want to know your client if they only want is for 4 months then find a good spot where you can lower points and increase rate where as a lender you make the same or more and the borrower has a reduced closing cost. All options are out there. 

Do you usually write into the contract terms to extend, and if so, are there usually points AGAIN? Depends on the lender. I typically see a 1-2% extension fee 

Do HMLs normally require payments monthly or just a lump sum of Principal and Interest at the end of the term? I have seen both ways done but if payments were deferred there is usually a premium. Those are the loans i see with 4+ points on the loan 

EPOs/PPP are all at discretion of the lender. I see plenty without and i see some that have a minimum 3-6 month requirement 

@Tommy McWhorter Some people use them as interchangeable and others have a clear cut definition. Private Money is a person or group of people who offer to loan you the money based on their own terms. A private loan might come from a friend, a business, a family member.

Hard Money - is a business that operates to lend money but is considered a non-bank since they can set their own guidelines and do not operate under the same regulations as a mortgage company or bank (wells fargo or B of A) would. 

Both have their benefits and can be easier and easier to deal with as you develop a relationship. They will have some criteria or expectations of you and your business plan so as a newbie you should focus on getting your ducks in a row and make sure you can share your vision vs just saying you want to invest in real estate. 

@Chris Stevens I love the NOVA market and very, very bullish in Richmond. I don't see that much competition out there and they offer great returns for flips or rentals. As for your questions 

1. Do you traditionally need hard money to take advantage of off market deals? No, you can use cash or any other type of lender. The big thing is usually timing. Most off market stuff is traded via wholesalers who have a limited time to own the contract. HML can move quicker and do not have as many underwriting requirements which is why you see investors using them.

2. How do you go about finding hard money? Use your network! Attend a local REIA or meetup including those posted here on BP. Also use BP, google, connected investors, etc. All great sources. Lastly, look at the titles and blogs that people write here usually a huge indicator. PM me if you need any advice 

3. Generally speaking, are these FB groups for off market deals reliable/trustworthy places to find opportunities? I personally do not like the FB groups. I tend to not believe what is out there especially when it comes to lenders. I have seen some crazy things like 100% financing on purchase and rehab at a 3.99%....too good to be true. The collect an upfront fee and never intend to fund the loan. I am sure the same happens where people what you to buy a contract they dont have the right to sell or reassign. 

@Ryan Holland - I think you will see an uptick on lenders offering long term options this week.The biggest adjustment today is the rate those loans are offered at. I would suggest you go into a refi or extension if possible with no PPP so you can refi at any point. A lot of my borrowers are looking for long term stuff however the rates that make sense today prevent some deals from hitting the DSCR requirement so I encourage them to refi into another bridge loan. Just seems like the right move today instead of locking in a long term w/higher rate and a prepayment clause.

My borrowers in the area are adjusting to BRRRR or converting flips to rentals. The primary reason is that it is easier to get a loan on cash-flow right now since market has dipped a bit. Although, from my conversation a they are waiting to buy houses and flip once they start to see a bottom of the market so they can buy even cheaper than anticipated and still sell high.

I feel that everyone's perspective is skewed based on their own scenario.If you have cash sitting you are waiting to buy since the market should continue to slide downward. You can then buy more with your money especially using leverage. IF you are uneasy during market adjustments or not liquid enough to ride through a downturn you convert to rental. The biggest concern on that is really vetting your tenants. You cannot kick anyone out right now during statewide shelter in place/stay at home orders.  

@Cole Britting The seasoning requirement is not a steadfast rule for private lenders/HMLs. It is a good guideline to have either improved on the property with documented proof. In your case, refi should not be an issue. keep in mind if you want anything long-term, most lenders will look at a DSCR. If your property is not stabilized and cash-flowing you may not be able to get anything longer than a bridge loan as was mentioned by @John Morgan.