All Forum Posts by: Jeff Cichocki

@Hunter McCook, it's possible I may be able to help, but if you are looking for someone local, the REIA's and Meetups in your area are a great place to start. I would also recommend checking out Dyches Boddiford. He doesn't advertise that he is a lender, but he is pretty well known in Atlanta as a private lender. If you reach out to him, let him know I referred you over. It won't get you any special treatment, but we are friends and it will help you break the ice with him faster.

Good luck. Let me know if you need anything else.

@Alfonzo Roberts,

While it's great that everyone is willing to share their opinion about finding the funding first, I respectfully disagree. I think telling anyone in this business to find the funds before even starting to look for a deal does a great disservice to them; especially when their new. If a new investor doesn't have anyone in their circle with the funds, they will run around in circles for a long time trying to figure it out. Most new investors are told to find private money because hard money is too expensive. But what if it's a great deal and their only way to get it funded is with hard money? Many new investors die on the vine trying to find funds for a deal they don't have. Many new investors die on the vine because their not out there working multiple things at a time. It's not easy being new. It's not easy to find funding when your new.

I'm not just a lender and I'm not saying this because I think everyone should only borrow from me. I'm not the best fit for every investor. I'm saying what I'm saying because I play both sides of the fence. My business partner & I are investors, lenders and we run REIA's. We also attend several others that our friends run both around our state and when we travel. My opinion is based on watching countless new investors come in with dreams of being successful only to have them crushed by well intentioned but impractical advice. I've watched a lot of investors at every REIA (mine and others) I have every attended flounder because of this.

The reason you need to do them both at the same time is because an investor (especially a new one) needs to figure out what kind of properties they want to go after. They also need to figure out what their lenders want to finance. Not all lenders will fund a deal just because the investor thinks it's a good deal. Most lenders have a taste for one kind of deal over another. You have to figure out if that lender is a good fit for what you're shopping for. You will likely need to line up multiple lenders. And then... You have to put the two together if you want to make the deal a no-brainer for the lender. A really good lender is your financial partner in the deal.

And, while it is important to create a relationship with a lender... Consider this from the lenders point of view... How can a lender give any kind of meaningful commitment to anything without the property being in place? It doesn't matter whether you are using Hard Money or Private Money; the situation is the same. The funds are only tentatively pre-approved. All the lender can say without the details is... "I think I like you and I think I like what you're about to do". A pre-approval is completely worthless because there's no meat behind it. If you've ever read a pre-approval letter from a lender, they are about as non-commital as can be. I've never seen a pre-approval from a lender that is worth more than the paper it was written on; mine included. All pre-approvals can be backed out of in the blink of an eye. The lender may like what you're trying to do, but hate the property. Then what? Most new investors stop looking for lenders to work with as soon as they find their first one (bad idea - they need multiple). Now they have a property under contract that they thought they had funding for, but no where to go. It really tarnishes a new investors reputation when they bail on their first deal because they didn't work on marrying the two together properly. Our reputation is our most valuable asset that we have. As both an investor and as a lender, I can't tell you how many times I've seen this happen.

Another thing to consider when your creating a relationship with a lender; especially a private lender... If you approach a lender and they like you and potentially want to invest with you, you have to get out there and hustle hard. If you don't find a deal fast enough, what do you think the investor will do with their cash? Every day you don't help them keep it busy, they are losing money. It's highly likely that they will have funded someone else's deal by then. This is why all investors need more than one lender in their contact list.

Sorry for rambling. Hopefully it sheds a little light onto the subject from a lenders point of view.

@Darius McCormick, Congrats! that's awesome that you're thinking about it at such a young age. 

Find the local REIA's and Meetups in your area. Attend them as much as humanly possible. Network with the other investors. Offer to work for free if you have to gain some experience. You'll find it invaluable.

Money is never the issue. You don't need a ton of money to get into this business. There are lenders (private and hard money) who will let you do no money down deals (they may want you to have a mentor to help though). If you don't have a lender that will let you do it, use other strategies like seller financing and sub2.

This is very doable regardless of your age, experience or financial position.

Good luck!

Here's my thought...

You should be shopping for properties AND building a relationship with a lender at the same time. These activities do not need to be exclusive of the other. Don't wait to build a relationship with a lender before you go shopping. I think you're missing out on opportunities if you wait.

If it's a good deal, it's easy to get an HML to fund it. Obviously there will be some criteria that you may need to meet to qualify.

Having good lenders to work with is critical. You need to create the relationship, but you don't need to wait for it. Ask around at your local REIA for some recommendations. Who have others used and what was their experience. Not all HML's are the same. Even if they offer identical programs, they will differ in thought process, speed and helpfulness in helping you succeed.

Good luck!

Here's a couple of different thoughts regarding selling the property... 

1. Why not sell it with owner financing? You can wrap the existing mortgage with a new loan and pocket the spread between your mortgage payment and their payment to you. It's a good way to continue receiving cash flow without any of the expenses. 

2. If you seller finance it... Once you create the note, you could also sell a part of the note off and receive a lump sum of cash while still owning the majority of the note.

3. Why not sell an option to another investor. You could sell a piece of the properties equity and not give up the monthly cash flow (or maybe you do give up some of it).

Anyway... the point is that there are more options out there than just sell or refinance. Different strategies and solutions will have different pros and cons to them. But, if you consider some of the more creative solutions out there, you'll likely find something that works perfect for you.

Good luck!

As a lender, I don't like lending to a person. I prefer that the investor has an LLC and that I'm lending to it.

Why?

Because it shows that they care about their investment. It shows that they are planning ahead. It shows responsibility. I want to see our borrowers position themselves for success; not waiting to be sued personally because 5 years later the new owner got some mildew in the bathroom and wants to sue.

@Steve Buckman's insight into having an LLC is spot on. You should have one. You should have good insurance. You should have an umbrella policy. These things don't guarantee success or prevent a lawsuit. But, attorneys typically look for the low hanging fruit when they sue. Have your properties segmented off into LLC's can help you be poor on paper and potentially help you keep more of your assets if you get sued and lose.

It's a complicated and deep topic. None of what I or Steve said is the gospel of RE investing. But you should take the information and take a look at how it fits your life and your situation. Use it to the fullest to help guide you to success.

Good luck!

@Mike Jacovelli, I think the guy that told you a hard money was going to come after your family watches way to many mafia movies. Lol. Thanks for posting that. You made my day.

Good luck!

It's also possible that they are afraid (either they or their agent has been burned) of the financing falling apart at the last minute. Unfortunately, banks (and many other lenders) do the underwriting at the last second. And, typical lenders take 4-6 weeks to make that decision. No body likes taking their property off the market to end up putting it back because the buy can't actually get financed (for any number of different reasons).

@Adrian Hollifield, What @Odie Ayaga said. You don't need to finish everything in the house in order to get reimbursed. Assuming a 3 draw schedule scenario, have your contractor break his bid into 3 parts. When he completes each part, the funds are released.

When I'm lending here in Wisconsin, I don't put a traditional draw schedule in place for my borrowers. My schedule is more dollar driven. I ask that they not ask for less than $3,000 at a time. However, to be clear, just because you bought the water heater, doesn't mean you're going to get reimbursed for it right away. It has to be installed (completed) to be paid. If a lender is going to fund something for 123 main street, the funds and work needs to be for 123 main street. 

The reason that lenders look for completed work is because all too often things like water heaters, furnaces, AC units, appliances, etc, are bought and brought on site only to disappear to another project later. If they are installed, they are more difficult to move. Lenders don't appreciate borrowers who rob funds from one project to pay for another unrelated project. Robbing Peter to pay Paul will always end up getting you blacklisted by the lender.

Good luck!

@Lisa Eckman, The difference between a Hard Money Lender and a Private Lender is that the HML is a professional and does it for a living and a PL is someone who lends privately on occasion. Either or both could lend on a residential OO property or on commercial (anything for business or investment purposes). The type of lender doesn't have anything to do with what they are willing to lend on. It is a more of a designation of status, experience and underwriting practices. All loans that are against real property are technically asset based loans. Even banks give asset based loans. Underwriting practices are what differentiate banks from HML's and PL's. Banks are credit and income based lenders who secure their loans against a hard asset. A typical HML or PL will base the loan primarily on the hard asset and very little on credit or income. Their underwriting styles are opposite of each other.

I hope that makes it a little clearer for you.

As a side note, I looked at your profile. It looks like you are new to lending. Please make sure that you get completely educated before you start lending money on your own. If what you learn seems complicated, find someone you can trust and lend through them. Until you are fully comfortable with lending, it's a lot safer for you to lend through someone who is experienced at lending others money.

If you want to look into getting trained, there are not many teachers in this arena. I would look up Dyches Boddiford and Bill Bronchick. Both offer hard money courses and classes. Attending live is way better than just buying a course. There is one more guy out there that is teaching this, but his name escapes me.

Good luck & feel free to keep asking questions.