All Forum Posts by: J Castro

Quote from @James Guillot:

Lately, I have been noticing a trend. Wholesalers have been sending me deals with ARVs too high, rehab estimats too low, and they aren't calculating closing costs, holding costs, or profit spreads (let alone extras, like hard money costs).

Obviously, this isn't a new problem, but it's more consistent than I remember. Is there a new "guru" in town teaching bad math? Should I dump these Wholesalers and try to find new ones for my area or is there something else going on?

Unlike a licensed real estate agent, a wholesaler generally does not need formal training to start. This low barrier to entry means many beginners enter the market with insufficient skills in financial analysis. Inexperienced wholesalers often fail to account for all potential costs, including holding costs and unexpected repair expenses, cutting into their already thin profit margins.

Experienced investors know which wholesalers consistently produce accurate deals and which ones don't. A wholesaler who repeatedly makes bad offers will quickly find it difficult to find buyers. As an experienced investor it should be your priority and your job to do your own due diligence. 

When wholesalers miscalculate and are forced to back out of a deal, the seller is left in a worse position than before. This practice is a major reason why many people, including real estate professionals, view some wholesalers as unethical (unfortunately).

Hey @Rebecca Speeks, welcome to BP!

Congratulations on your real estate investing journey! Success in this field is built on a foundation of solid research, a clear strategy, and long-term discipline. 

Networking with experienced professionals and investors offers significant advantages, including access to invaluable market insights, expert guidance on industry trends, and mentorship opportunities. Here in BP, you'll be able to find many of your answers. 

Happy to connect!

Hi @Frank Ellis, welcome to BP! Great to have another finance pro in the mix.

Hey @Garrett Ian Dean, welcome to BP!

Congrats in your new job! What you are feeling is normal, mainly in today's era.

To achieve financial freedom in your early 20s, involves building a strong foundation of positive habits, strategic planning and good financial habits that will set you up for long-term success. Your 20s are the best time to start investing due to the power of compounding. Small, consistent investments can grow into a substantial retirement nest egg over decades.

Build financial literacy and goals, define your "why." Financial freedom isn't a single event but a process driven by a clear purpose. Decide what your money is for, whether it's retiring early, traveling, starting a business, or starting to invest into real estate (affording a house). This motivation will fuel your discipline.

Learn about personal finance. Take the time to understand key concepts like budgeting, managing credit, and investing. This knowledge will help you make informed decisions and avoid common pitfalls. Use the 50/30/20 rule. A popular budgeting guideline is to allocate 50% of your take-home income to needs (rent, groceries), 30% to wants (entertainment, hobbies), and 20% to savings and debt repayment. As your income grows with promotions and new jobs, resist the urge to immediately upgrade your lifestyle. Instead, redirect extra income toward savings and investments to accelerate your financial goals.

Building financial literacy is a superpower that will benefit you for life. Continuously learn about personal finance by reading books, listening to podcasts, or taking courses. Staying informed will help you make better financial decisions as your life and goals evolve. There is a wealth of information available here in BP to help you understand personal finance, investing, and wealth-building strategies.

Wishing you all the best in your future endeavors!

Quote from @Chris Seveney:

I think the answer is it depends. Those who approach a homeowner and distress and tell them “we are here to help you” are completely full of it. They are there to help themselves and there are actual state laws considering this predatory. If you are upfront and honest with them, and also tell them their options which do include bankruptcy, then I do not see issues with it.

For investors, the ethics of helping homeowners in foreclosure depend on the intentions and methods used. When done transparently and with genuine concern for a homeowner's
welfare, it can be an ethical investment strategy that provides a much-needed solution. However, the same situation can become predatory if the investor's sole focus is on taking advantage of a desperate seller for maximum profit.

      - An ethical investor aims to solve the homeowner's problem while still earning a fair return. This can involve helping a family facing a major crisis, potentially saving them from financial ruin and a damaged credit score.

      - Unethical investors, sometimes called "rescue artists," exploit a homeowner's vulnerable position. Their actions can leave the homeowner in a worse financial situation than before.

In general, if an investor's actions increase the homeowner's options and control over the situation, it is more likely to be ethical. However, if an investor uses pressure, deception, and complicated paperwork to reduce a homeowner's choices, it is a sign they are being
taken advantage of.

Quote from @Jay Hinrichs:

Quote from @J Castro:

Thank you for posting this notice. This highlights the vulnerability of borrowers who, facing financial strain, or may rush into fraudulent loan agreements without proper vetting. Scammers prey on this desperation by making appealing offers that are too good to be true, pushing individuals into predatory and abusive schemes.

• Never pay an upfront fee for a loan: A legitimate lender will never ask you to pay for a loan before it is delivered. Valid application or origination fees are typically deducted from the loan amount itself.

• Be skeptical of guaranteed approval: No matter how bad your credit history is, guaranteed approval is a scam. All legitimate lenders perform some form of underwriting to verify your ability to repay a loan.

• Do not succumb to pressure: Do not let a lender or broker pressure you into making a decision quickly. A trustworthy company will give you time to consider the offer and understand all the terms and conditions.

A scammer, often targeting those with poor credit, promises a loan but requires an upfront "processing" or "insurance" fee. Once the fee is paid, the scammer disappears without delivering the loan. This tactic offers "guaranteed approval regardless of credit history". Legitimate lenders never guarantee approval, as they must first verify a borrower's ability to repay. This claim is a ruse to collect sensitive personal and financial information.

one needs to watch the American Greed episode on Remington financial they were the poster child.. and a little different scam they went after dreamers looking to do more than vanilla loans.. they had offices in scottsdale and I think MN and appeared very legit but they required 10k non refundable DD money.. which over the course of 20 some years they took in thousands of 10k deposits and made less than 10 loans.. the owners went to prison.. the lady who busted them was Ingrid Robinson and she has a website on DD scammers.. I almost fell for this myself back in 2011 when capital was near impossible to get because of the GFC I had what I think was a semi complicated bizz plan and they were just too quick to approve and did not really ask the probing questions just hammered for the 10k because I was pre approved LOL.

what we see now I believe is not as much desperate or maybe equal desperate and those that simply dont know what they dont know and with the internet the way it is.. its the only shopping they do is on line its what they are used to. 

PS because the 10k was just too small of an amount for folks to litigate over .. people just chalked it up to my deal did not fly.. Ingrid got pissed hooked up with and FBI agent and took these guys down.

Thank you for the recommendation to watch the "American Greed episode on Remington financial". I don't recall watching that one, I'll put it on my to watch list.

An important notice for all borrowers, new investors to always remember...
Legitimate lenders, especially for large, verifiable transactions like a down payment on a mortgage, require secure, traceable payment methods. They do this for both security and legal record-keeping.

Thank you for posting this notice. This highlights the vulnerability of borrowers who, facing financial strain, or may rush into fraudulent loan agreements without proper vetting. Scammers prey on this desperation by making appealing offers that are too good to be true, pushing individuals into predatory and abusive schemes.

• Never pay an upfront fee for a loan: A legitimate lender will never ask you to pay for a loan before it is delivered. Valid application or origination fees are typically deducted from the loan amount itself.

• Be skeptical of guaranteed approval: No matter how bad your credit history is, guaranteed approval is a scam. All legitimate lenders perform some form of underwriting to verify your ability to repay a loan.

• Do not succumb to pressure: Do not let a lender or broker pressure you into making a decision quickly. A trustworthy company will give you time to consider the offer and understand all the terms and conditions.

A scammer, often targeting those with poor credit, promises a loan but requires an upfront "processing" or "insurance" fee. Once the fee is paid, the scammer disappears without delivering the loan. This tactic offers "guaranteed approval regardless of credit history". Legitimate lenders never guarantee approval, as they must first verify a borrower's ability to repay. This claim is a ruse to collect sensitive personal and financial information.

Quote from @Brandon Croucier:

At this point, it's getting out of hand. I've never had a bed bug incident but it seems every time a guest damages my property and I put in a claim I get a 1 star review and Airbnb claims it to be "non-retaliatory".... Absolutely ridiculous 

Yes, many Airbnb hosts have reported being scammed by guests who fabricate issues to receive refunds or damage property, often feeling that Airbnb policies favor guests, leaving hosts with little recourse and potential financial loss. Common scams include guests fabricating issues like fake bed bugs or property damage after a stay to demand partial or full refunds.

Hosts can report these incidents, but they are often disappointed by the investigation outcome and the perceived lack of protection for hosts from Airbnb.

Quote from @Ryan Stuckey:

For a short-term rehab project, 100% financing on purchase and rehab is not all that uncommon. Several regional lenders offer it in some form, usually with experience requirements but not in every case. 

Of course, normal profit margins are needed/expected, so the loan cost is usually capped at 70-75% of ARV and that right there is the margin of safety. Purchase and rehab costs kept within this ceiling would be 100% covered. That's correct - no money down. No gap funds, second lien, seller financing, etc needed. Very simple.

Of course, lender fees and third-party closing fees (title/insurance/appraisal) are not typically covered and are expected to be the borrower's skin in the game. Thus, available liquidity of at least $20-25k+ is expected to cover closing costs, a few interest-only payments, and partial rehab spending before draw reimbursement.

Fees are usually reasonable for hard money and in line with the higher leverage offered in such cases - 11-13% and 2-4 points, i.e. perhaps a tick higher than the mass of 10-20% down offerings out there.

@Ryan Stuckey Great way to explain it! You hit the nail on the head.

Hey @Duncan Hogan welcome to BP!
This second home you are buying is it an investment property or a new house-hack? Does it require any rehab (or are you planing on doing any rehab)?

As an in investment property there several options you may want to consider, depending on your goal and exit strategy. An option would be starting it of as fix & flip loan (short term Interest-Only, 12–24 months) up to 90% of the purchase and 100% of the rehab. Then once stabilized you'd be able to refinance into a DSCR loan (30Yrs or 40Yrs loan term) at 70–75% LTV. 

If the property doesn't require any rehab or if its already rented and you don't want to do any repairs from the start, then you can just start as a DSCR loan up to 80% LTV for purchase. This is usually the fastest way, with less documentations.

If you’d like, I can put together a draft term sheet once I have: Current rent roll & leases, rehab budget (line items) and exit strategy. That'll let me show you a realistic structure — both options.