All Forum Posts by: Rob Beeman

@Garreton Smith  Good job. Having someone that you can trust on managing the rehab until you master that is key. The numbers seem to work, providing it sells at or around the $650K (unless its already been sold). Now that this one is in the "rearview mirror", time to snag another! 

@Garreton Smith Leverage (LTV/LTC) is down and rates are up. Rates are around 12-13% plus 2 points.

Direct lender of 100% financing for purchase & rehab on mixed use properties (must be at least 75% square footage residential).

Serving 30 states, loan is to your LLC - doesn't appear on personal credit report.

Email: [email protected]  Best #: 215.913.1580

As a direct rehab lender in 30 states we finance 100% of the purchase & rehab up to 65-70%ARV on 1-8 Unit properties (even for newbies).

We also finance 100% of the build (and 70% of the lot) up to 65-70%ARV on new construction of 1-8 Unit properties. Using our capital supplies you maximum leverage, allowing you to do more projects, larger projects or simply conserve your capital......SMART!

Do you invest in purchase & rehab of small multifamily properties of 9-20 units?  No worries!  We lend 85% of the purchase & 100% of the rehab on these.

Email: [email protected]   Best#: 215.913.1580

@Christian Hilbrich  My take on investment properties is that they should ALWAYS be deeded in an entity, NOT a personal name. Personal residence = personal name. All investments = NOT personal name. Just works for me. 

I feel the best solution is to refinance the property, transfer into an LLC during that time (if not already there) and do it as a STR investment property. One catch is not all DSCR lenders are the same. While some offer 30 year dscr loans on 1-4 unit STR's their guidelines say that the income used to calculate the dscr will be the LESSER of either the proven STR income from the property OR market rents (meaning long-term rental rates). Almost always the long-term market rent will be lower than the STR rental track record, so the borrower ends up forced into a lower LTV loan due to dscr qualifying.

But, there is a solution and I will send you a DM to share what it is.

@Christie Walker-thompson Using "other peoples money" can be a leverage tool when investing. This reduces the amount of money that you personally have in the venture, however the use of that money comes with a cost, and strings. Most rehab style lenders (what some people call hard money) will issue the loan to an entity (an LLC) and the member(s) of the LLC are the additional guarantors.

The lender will typically want to see that you have money in the deal (sometimes called "skin in the game" - HATE THIS PHRASE, but it is used often in the business). The lender normally wants your cash to come from either checking/savings or retirement accounts (up to 50% of the account balance), or a combination of them. They normally frown on you borrowing the money to fulfill your cash needed in the deal (they see it as creating a loan to create their loan....not good). Not unusual for the lender to request the last 3 month's bank statements and if they see large deposits, they will seek the source of them. So, if you chose to gain some of your cash in the deal from a HELOC and it was deposited into your account beyond 3 months ago, then there would be no questions. Still said, you are borrowing in order to borrow again, and not certain that is the wisest use of other people's money, but its your call.

@Andrae Warren  I can share info from both sides of the fence on this, as I was a flipper/borrower before I became a rehab lender. Lenders typically pay as work is completed and inspected. Some will hire a 3rd party inspector, others may use an app and have you (or your designee) take pictures and upload them to the app, while others may just have you take pics and email the pics to them (TIP: always take before & after pics of your projects for several reasons).

The scope of work (SOW) is the "road map" of the rehab. It is wise to be VERY detailed on the SOW line items. Normally the lender will only pay the line items that are "completely" finished (some may pay the percentage done, while others will only pay that item when it is 100% completed). For this reason I am a fan of breaking down the line items. Example: instead of a line item of INTERIOR PAINTING @ a cost of $6,000; break the interior painting out by areas of the interior (either by rooms, or by floors). This way if some areas of the interior are painted, while others are not yet completed, you can get paid on what IS completed, as opposed to NO payment for interior painting. This can also be done for tile work, flooring installation, etc. Cash flow is important to the rehab, so you want to do what you can to keep the cash coming from the lender's escrow to keep the project moving.

How you choose to pay the contractor(s)/vendor(s) is between you and them. Some investors pay their contractors as they receive draws from their lender, while others pay their contractors regardless of whether the draw was received or not. It depends on your cash reserves position. Most lenders do not limit the number of draws, so you can gain smaller draws more often if the lender is OK with that, however there may be a fee per draw from the lender. I typically broke my rehabs out into no less than 4 phases (draws) and larger rehabs would be more like 6-7 phases/draws.

TIP: Have contractors complete a W9 form for tax purposes, and have them sign a mechanic's lien release so that they can't file a mechanic's lien on the property (some lenders may require this). These forms might be available online in generic form.

Hope that this helps and good luck with your rehab sir.

Not exactly sure that this is allowed on BP, but I wanted to make people aware of the blog post I created about Making Your Rehabs Idiot Proof. I have done what seems like too many rehabs and learned a ton (made a ton of mistakes too) and along the way I realized that if I incorporated systems and procedures into my rehabs it seemed to make them run smoother and make working with contractors more enjoyable (lets face it, even contractors will agree with me that doing a rehab can be stressful).

I am not saying that contractors are idiots, but what I am saying is that when doing my rehabs it made them more manageable and produced a better result when I simplified the entire process............removing the element of guessing and speculation (especially when it came to design, finishes and color selections). Here is the blog post on BP: https://www.biggerpockets.com/...   If it doesn't allow the link to appear, you can locate the post referencing my profile.  Hope that someone gets something positive out of it that might help them reduce any stress related to rehabbing and/or general contracting.

@Katherine Earle  What worked for me was to create smaller SOW's from the Master SOW. This way I could segment those smaller lists for each contractor on the project. In other words, the tile contractor only saw a SOW of the listed items that pertained to their part of the project. I learned to keep it simple and not confuse anyone by supplying them the master SOW that had many parts to it that DID NOT apply to what I wanted them to bid on/service. 

Try to match the abilities and personality of the contractor with the part of the project that you want them to service. Do not have a painter doing carpenters work. Focus each contractor on the part of the project that matches their talents, skills, experience & tools available. The projects move smoother this way, the finished product is much nicer and the contractors enjoy their work and are appreciative for it.

You may find that keeping it simple and being VERY detailed when conducting walk throughs with prospective contractors can help reduce the stress of working with contractors and gain the finished results that are sought (quality & timing). Here is a an example. If we are seeking bids for window & door replacement, we supply the contractor the window count, the color & type we want, whether we are seeking made to size or over the counter (framing/capping may be needed when downsizing in windows), and with door replacement we supply them the door count, the size of each door, whether it is a left swing or right swing, brand name or material type and even what door knobs/locks we want used. Making it that simple and that detailed on every part of the project takes more work, but you may find that it makes your life easier, the contractor's job easier and establishes long-lasting relationships with solid contractors that enjoy their business.

Finally, the wise property buyer negotiates 24/7 access BEFORE closing so that they have plenty of time to conduct measurements, create the SOW and conduct walk throughs with contractors to gain bids BEFORE they close on the purchase. This shaves time off the rehab and helps you work out scheduling and any unforeseen items before even owning the property. Hope some of this was helpful.

@Constancia R. Can you share where it is located and does it need improvements, or is it turnkey and occupied?