All Forum Posts by: Jeff S.

By brokering @Michael Wyatt (if you’re still around), I assume you mean finding and screening qualified borrowers, evaluating the property, and originating the loan using proper disclosures and vetted paperwork. No one is going to pay you ½ a point for a phone number. You must add value, but this doesn’t mean you have to become a broker.

Many of the legitimate larger private/hard money lenders, easily found through Scotsman Guide or the AAPL, offer affiliate programs you can join at no cost. Click the affiliate link on their website. These lenders will freely provide their loan criteria as well as limited training so you understand their requirements. After all, you are representing them and soliciting loans on their behalf. In return, you will earn a commission for closed deals.

As an affiliate of these companies, you are their sales representative. I suspect many of those who claim to be lenders on this forum are affiliates, essentially commissioned salespeople. There’s nothing wrong with that (my stepdad was a commissioned salesperson in a different industry).

Affiliates are obviously not brokers, do not hold legal credentials, and are normally not employees of their associated lenders. (Though in some states, typically those that require a license, you must be an employee to represent a lender.) Nonetheless, they can earn fees for loans that close, and some do well. Since all lenders are different, with varying loan criteria, you’d be wise to become an affiliate with several. Here, you can pick and choose as specific criteria fit particular deals, states, and borrowers.

Compared to real estate ownership, the liability risks of lending are relatively low, @Elizabeth Watmough. Whatever direction you decide, make sure your lending is separate and distinct from any real estate owned. There’s no reason to expose your lending portfolio to something that could happen in a rental.

Separately, and not trying to divert, but I’d be super careful of anyone suggesting it’s ok to lend your (non-replaceable?) retirement money for gap funding. These are second-position loans and are easily wiped out in foreclosure or bankruptcy. Did your flip method coach explain this to you? Hmmm. There are much safer ways to lend retirement money for flips, such as first-position purchase money and even syndications. Of course, you’ll be using a professionally prepared loan document package that includes a personal guarantee. Right? I’d hate to see anyone get taken advantage of by a coach.

Talk to some local hard money lenders and ask which lending attorney they use. This is not the same as a real estate attorney. He or she should be able to explain MA lending law to you, including usury and licensing as well as the risks if you must foreclose, if a borrower declares BK, or otherwise contests a loan. Lending attorneys will also provide a set of loan docs, written in your interest, that will protect you. A coach, perhaps someone who is also borrowing from you (???), might not be as knowledgeable or forthright. Sorry -- just reading between the lines.

We meet 99% of our borrowers at local real estate clubs, @Codey Wendel, and also attend conferences on occasion. Every serious investor has a business card. Some will present a QR code that brings up their contact information on my phone when I scan it.

When I get home, I scan only the relevant cards, including any notes I might have taken, and then throw all of them away. Afterward, I respond by text or email to those whose cards I scanned. Most of the QR code digital contacts get lost in my phone, only to be discovered a year later, leaving me wondering who they were. No one will convince me that these are as effective as a paper card.

Networking is an art, and it's hard for me to take anyone seriously who provides no means of contact. Moreover, it wastes everyone's time and will not achieve your stated goal of getting your name out. It's essential for you to make it easy. One hundred cards from Vista Print cost $18 and they don't have to be fancy. Name, mailing address, email address, and a cell phone number for texts are the bare minimum. Avoid using black or glossy cards, as they should be writable. While you're at it, despite my dislike for them, you should cover all bases and create a digital business card using only the free version on one of these sites. I have little hope anyone actually responds to these, but you never know.

When you receive a business card, make a note of where you received it, possibly the date, and any action expected from your conversation. Then, promptly follow up with either what you promised or a simple message expressing your enjoyment of the conversation about _______ and your hope to meet again. The idea is to jog the person's memory of you and maintain the relationship. That's why you met them in the first place.

Before you make an offer on a property, @Muhammad Saqib, you should have a vetted process in place to determine if it’s a good deal. If you don’t have one, which seems apparent, you are not yet ready to make offers.

When we are presented with the numbers on a flip, until verified by us, we always use the maximum rehab costs and minimum ARV. If the rehabber keeps changing the numbers to make the deal work, we know they have no basis. This is a red flag. That is, why would you not use your worst-case estimates if they are credible? Your min $30k and max $50k rehab costs now have a $20k spread!!!

In addition, a 2-month turnaround would be tough for an experienced rehabber. Sorry, but it defies all credibility for a newbie.

No lender should touch this property, Muhammad. You will lose money. See below for an estimated P&L. Talk to some local experienced lenders and successful flippers and learn their lending and buying criteria. Perhaps partner on your first deal. An experienced lender will have a spreadsheet they can review with you.

You can't spend more than $211k for this property. This will result in a $38k profit, or 11% of the ARV.

Click on the image to enlarge it.

This is a state-specific question, @Curt Bixel, and likely even more regional. How did you determine that 10% is the market value of your money in the first place? No one apart from someone who makes loans in Columbus can tell you that your return is acceptable. My recommendation is to call some local hard money lenders and perhaps attend some local real estate clubs to ask what others are paying or charging.

Yes, HML rates have been going up. With Treasury and related rates such as SOFR on the increase, Wall Street is expecting greater returns from the HMLs they support, thus compressing their margins as they compete among themselves. Thankfully, you're not in that end of the business. Rates for short-term bridge loans, typically for flips, have also increased slightly. Ask around locally for typical terms since these are the costs your borrower will have to pay.

Rest assured, if your borrower is active, then he or she fully understands the local rates. You are not Walmart and don’t have to be the low-price leader so long as your other, non-financial, terms are competitive.

Even if you keep your interest rate the same, you’re missing an important component that you should be able to charge – points. Raising your rate to 10.5% or 11% is a 5% or 10% absolute increase. Leaving it the same but charging 2 points at origination is a 20% increase. This also increases your net return. Reasonable points are customary and nothing that should surprise a borrower.

I assume, of course, that you understand the usury restrictions in OH and will remain compliant.

Good luck to you, Curt.

@Bryce Carroll wrote, “The IRA custodian is Udirect.“

No, it's not, Bryce. uDirect IRA Services is an administrator, not a custodian. I believe they use American Estate & Trust in Nevada as their custodian. Good luck getting hold of them if uDirect is not responsive, but at least you have another avenue to pursue.

For IRAs, there are custodians and there are administrators. By law, all IRA funds must be held by a custodian. Depending upon whether they are a bank or a trust company, custodians are heavily regulated by the IRS, DOL, possibly the FDIC, State Banking Commissioner, and the Comptroller of the Currency. Administrators are not subject any to such scrutiny and are really just middlemen.

An administrator will pass your funds to a custodian, provide statements, and hopefully help you stay within the law when you invest your IRA funds. Custodians do exactly the same thing but with the added regulatory and financial scrutiny. Why would you place your money with an administrator?

Maybe not perfect, but you can tell if you are dealing with a custodian rather than an administrator because they will usually have the word "Trust" in their name or they will be a bank or brokerage. If it's not clear to you, then ask. And if you think you're having issues, consider what happened to those that placed their IRA funds with American Pension Services, an administrator.

I appreciate the kind words, @Joe S. Thank you.

There are a lot of options to get into lending with little or no money, @Noah Swope.

One way is to become an affiliate of some of the larger lenders, which can easily be found through Scotsman Guide, the member directory at AAPL, or even on BP. Most will have a website link to their affiliate program. Here, you act as a commissioned salesperson and get paid for the business you bring in which closes. Depending on their criteria and your borrower’s needs, you can and should represent many companies. I suspect many of those who call themselves lenders on this board are really affiliates.

If you have enough money for even just a few loans, you can hypothecate them individually or collectively. In this case, you re-lend the money that others are willing to loan to you using your loans as collateral. You’ll earn the spread between what you’re lending at and what you’re paying your lenders. Understand that depending on your state, this might require a security exemption, which is something you should check with your attorney.

You can originate loans using white paper offered by many larger lenders. I personally find this approach deceptive since the borrower doesn’t know who their lender really is, but it’s legal in many states and seemingly widely used.

Another option is to become a broker and originate loans for other lenders.

Once you become successful and show that you know how to make money by lending money, others will ask if you accept investors. If you know enough of them, you can form a syndicated mortgage pool and lend their money, taking your profit as fees. Local real estate clubs are a good place to meet like-minded investors.

Don’t try to do everything online. If you haven’t considered it, become a member of the AAPL and attend their convention. You’ll meet many lenders, lawyers, and service providers in all shapes and sizes. There will be lots of money and creativity in the room.

I’m glad you found the resources to solve your problem, @Kim Hopkins. Since my first post to you, above, I also started using Bard. It’s similar to ChatGPT but I don’t find the VBA code recommendations as sophisticated. Nonetheless, Bard might have a few advantages for you.

Where ChatGPT is run by OpenAI, its database stops in 2021. This might not matter for coding issues, but it will affect topical discussions. Bard is run by Google and is as current as its web browser is. One benefit to you is that Google also runs Google Sheets. Therefore, I was wondering if you would have gotten more useful answers for your Google Sheets problem with Bard.

It doesn’t matter at this point, but you might try Bard out in the future as well as ChatGPT. FYI, I’ve tried it for Excel VBA and I like ChatGPT better.

TAKE EVERY DIME THEY WILL LEND YOU.

With the Federal Funds Rate at around 5% now, it costs even Bank of America more than 3% to borrow money. You could earn interest by lending to them. You could also lend the money privately and make a huge spread using the current, honest, P/HML rates of between 10% to 14% now. That's what money will realistically cost you in today's market.

Of course, this is a scam. @Chris Kendrick. Though it seems you want to be convinced of that.