All Forum Posts by: Edwin Epperson

@Greg Cook, as a Private Lender (meaning I loan MY OWN CAPITAL) in Tampa, I require a borrower to close in an LLC, and this is due to state laws. Every state will be different so finding out what your state laws are in reference to lending to individuals vs LLCs, based on what the collateral is will be very telling. For instance in FL, if I lend to you in your personal name, even with the proper B2B purpose loan, and Non-Primary Residence disclosures, and you default, if you claim that it WAS your personal residence and you were not clear about the disclosures, the first thing the judge is going to do is look to see if I as a lender met all the stipulations and regulations concerning consumer loans, such as CFPB, Section 32, and RESPA requirements. By ensuring I lend to entities I absolutely enforce and ensure this is a business-to-business transaction for investing purposes. Combine that with my disclosures and there is no way a judge will consider this a consumer loan. It all depends on the state. As a general rule of thumb most Hard Money Lenders/ Private Lenders/ Brokers are all requiring you to borrow in an LLC, but not always. You could always get a loan from a bank and they would allow you to borrow in your personal name

Question, why wouldn't you want to borrow and place title to the asset in an entity you own and control?

Investment Info:

Single-family residence private money loan investment in Fort Walton Beach.

Purchase price: $83,200
Sale price: $220,000

Not every deal is a slam hit, a home run. This was one of those deals. We loaned 80% on the purchase of this property with an experienced investor but the first time we had worked with them. We also loaned 100% of the projected renovation which was supposed to be only $50K. There was an unaddressed foundation issue that resulted in an additional $40K worth of work. This caused the project to take 2 mo. longer and reduced profit to only $10K to the investor. Many lessons learned on this deal!

What made you interested in investing in this type of deal?

The experience of the investor, their team in the local market, such as RE Agents and contractors they had a good relationship with, as well their vision for where they wanted to grow their business. I pride myself on being a "Relational Lender" and I truly desire to help those investors who want to build a long-term relationship. They were willing to help make us comfortable as far as meeting my requirements, as well they had a good amount of liquidity after closing.

How did you find this deal and how did you negotiate it?

The investor found me through a local realtor who met me at an REI Club. I met with the investor over dinner and learned more about their business, their plans, and what they wanted to focus on. I expressed my concerns and they made sure they helped make this first deal of many, easy and smooth. The reason they decided to use me? No credit check, no Personal DTI requirements, as well the ability to close in a very short amount of time.

How did you finance this deal?

I financed this deal through my Turn-Key Private Lending solution. I had a few military buddies and family who were sitting on capital and wanted to invest in real estate but they did not have the Time, Knowledge, nor Experience to invest directly themselves. Taking the role of the bank seemed very attractive and with my one-and-done for you solution, they jumped on the opportunity to invest in a 1st position loan secured to an asset well undervalued.

How did you add value to the deal?

When the foundation issue happened we helped the investor identify a foundation remediation expert in the area, and offered additional funding to get the deal across the finish line. This is also where the borrower's liquidity came into play. Because they had liquidity they took care of the foundation issue without any problem and we wrapped up the project a little over timeline but still with a profit.

What was the outcome?

The borrower was able to sell the property in 9 months. It took three months longer than expected due to the foundation issue. Yet because the market was on an upswing, the investor did walk away with some profit, as well all their original investment back.

Lessons learned? Challenges?

This project put into place a reminder for me to have the property inspected. Now I always conduct a property inspection through a 3rd party service provider. They conduct what's called a feasibility study and measure the scope of work to the needs of the property and ensure two issues are addressed. #1 Are all issues of the property addressed in the scope of work? #2 Can the proposed renovation be completed on the current budget? This study has been a life saver more than once.

@Michael Voltner I agree with @Rick Pozos.  As a private lender in Tampa FL, I structure my new construction loans where the property must be owned by the builder, and then construction costs are provided in arrears, meaning you have to put your money to work in the project first and then I reimburse you.  For more seasoned, well-capitalized builders, who I have done multiple builds, I'll refi up to 50% of the land costs at the origination of my loan, but I still require the builder to put their money into the first phase of work and once its completed I reimburse them for that first phase.  Several issues with builders make this unattractive, and thus I don't do too many new build loans.

Pro - Using Bank Financing:
#1: A Bank will provide the money upfront to start the construction (from my understanding) plus reimburse/ provide some if not all of the purchase price.
#2: A Bank will offer a much longer loan than I am willing to.  In this market, if the new build cannot be completed in 6 or 9 months I won't lend on it.  Too much exposure right now to the coming market correction the longer I leave my money on the street.
#3: A Bank's rates are typically going to be MUCH lower than mine. I'm lending out my capital, so I want a solid return on my portfolio (my loans). I don't lend to those who are rate shopping, I choose to lend to those looking for a long-term relationship and the benefits that come with loyalty and trust (read better rates and JV options). So better rates come but after doing business together. Most investors are too near-sighted to be willing to jump through the hoops to establish that long-term relationship.
#4: Banks may offer "No-Payment" loan options, like what you mentioned above. Myself, as well as most HML DO NOT offer "No Payment" or "Accrued Interest" loan options. We require monthly payments for our capital. The way around this is to raise private money (notice it is different than private lending) and structure it in such as a way that your private money investors opt to receive repayment of principal as well as earned interest when the project sells.

Con - Using Bank Financing:
#1: They are going to check credit, Personal DTI, 2 yrs Taxes and Business income/ performance over a period of time, license standing, background check, and Liability/ Workmans Comp Ins. The only thing I will check is background, license, insurance, along with proof of previous builds. This cuts down on time and hassle for the builder
#2: Banks may take 30+ days to close.  I can close within 2 weeks as long as everything is in place and the builder is organized and thorough.

My suggestion find a local Private Lender, local to where you are at and choose to work with them.  You could also look for Private Money (meaning unsophisticated investors) who you educate and "sell" them on your concept build, or idea.  This will most likely need a SEC filing to offer non-registered securities commonly referred to as a REG D 506(c) or (b) to be legally able to raise private capital.  Best wishes to you, and much success

@Chris Seveney as a Note investor (I'm not sure if you originate or purchase notes) is Propstream a great way to identify real estate investors/ capital investors (ie: private money)?  Or do you use it to make high-level analysis of property values?  Just want to see what other uses that it has for a fellow private lender in Florida.

BP Community, I am looking for a Florida attorney who specializes in representing creditors in lawsuits, specifically dealing with foreclosure.  My attorney is unavailable to handle this matter as they are going through family issues.  It is my company that holds the lien, and I am pursuing foreclosure on two properties cross collateralized.

@Teppei Kuwamoto I 100% agree with @Bob Reinhard. Primarily his 2nd point. As a private lender, I offer loans and JV's with my investors, but only in the state of FL. And I ALWAYS require the investor have skin in the game, and the "Skin-in-the-game" cannot be leverage capital, ie; you are borrowing it. It has to be equitable. Now whether that's your cold hard cash or a JV partner it makes no difference to me, but it always is a huge red flag for me when an investor does not have any money to put towards a deal. And even if that an investor did have money, but they were simply choosing not to put it into the deal, I refer back to what Bob said, how would I trust someone who is not willing to risk their own capital?

My advice is you will not find a lender willing to offer debt on auction property. Too little time to underwrite and we cannot get clean title, until after the closing. The best option would be to line up an equitable partner to finance the purchase and then seek a HML/PL to provide a refinance along with construction costs. Your partner would then receive whatever part of the purchase refinanced back, and you would then have the construction costs financed as well. Best wishes, and much success.

@Zachery Hitchcox as a private lender here in FL, my focus is on short-term loans, typically 6 - 12 months IO, with balloon MTG's, though I do broker out 30yr fixed rate rental loans as well. By lining up LTR financing, you are stepping into the more institutional world, but honestly, you should not bother going through the hassle of paying anything until you are ready to actually close on a deal. There are DSCR loans available made specifically for RE Investors, like yourself, and they allow you to own the property in an LLC, from the day of purchase. So none of this "sneaky-petey" (no offense to those named Pete) changing the title from personal to your entity after closing, because the bank would not allow you to buy in an entity. Also, the DSCR loan products are what is most commonly referred to as "No Doc Loans". We don't require proof of income, we don't require 2yrs of taxes, we don't consider personal DTI, we are strictly looking at the asset and the performance of that asset. Happy to discuss more with you on this, but I would not suggest paying for anything right now until you have a deal under contract. Also, DSCR lenders can close within 30 -45 days or even sooner.

@Tristan Wheelock as a Tampa Private Lender, and familiar with all the places you and @Dave Foster are speaking about.  Dave is giving you sound solid advice, and all the "metrics" he is mentioning are important and are creating quite the unique environment here in FL.  I would encourage you to heavily consider his advice, and even sit down with and speak about what he sees in the market and the strategy of using a 1031 exchange for your and your brother's benefit.  Best wishes and much success!

 The Panhandle is the BEST!  Especially the 30A area!

Investment Info:

Single-family residence private money loan investment in Shalimar.

Purchase price: $180,000
Sale price: $385,000

We provided a short-term loan for a father and son real estate investing team. They had a crystal clear understanding of the requirements of this project, as well the scope of work. The renovation amount was $85,000 and they absolutely blew the average days to renovate out of the water. They completed the renovation within 2 months, and then they refinanced us out. They held onto the property for a few years and ended up selling in 2019.

What made you interested in investing in this type of deal?

The Father and Son team were very well trained and had the capital requirements to meet my new investor (less than 5 completed deals) requirements. They had a very detailed scope of work provided and they were acting as the GC, by coordinating all the trade skills. The location was solid due to the proximity of Eglin AFB, so their ultimate goal of holding for a long-term rental made sense in the market.

How did you find this deal and how did you negotiate it?

I met the father at a local real estate club called the Pensacola Investors Guild or PIG. Great group of investors, which offers solid content and training.

How did you finance this deal?

We financed this deal using our proprietary method of "Turn-Key" Private Lending. I had multiple investors, some military buddies and friends, all participate in a 1st position loan. We provided 80% of the purchase and 100% of renovations as a 1st position loan, and I serviced and handled the ongoing draw inspections, draw approvals, and collecting/ distributing monthly interest to each investor.

How did you add value to the deal?

By providing a quick close, and ease of processing and underwriting I allowed the investor to be able to close within the time frame they had committed to with the seller. For our capital investors, they had a truly passive form of investing, where everything was managed and handled by a professional team and they sat back and collected monthly income checks. Truly a win-win-win for everyone involved.

What was the outcome?

The borrowers ended up completing the renovation in record time, $85K in less than 2 months. They lined up a 30yr loan with a local bank and held onto the property, renting it out for another two years and then sold the property for quite a bit more than what they originally invested. I believe if my memory serves me right, they ended up with a 400%+ return Cash-on-Cash!

Lessons learned? Challenges?

the one thing about this investor was their temper. Every little thing ended up be an emergency, and needed to be addressed like the President of the United States was visiting that night. If there is one thing that investors should value is the ability to approach any issue, with a healthy dose of patience and calm.