All Forum Posts by: Account Closed

Not sure about the rules in Colorado, but here in Texas, hard money lenders do not lend on owner-occupied properties.

If it is your first deal, you will probably need other mitigating factors to offset the lack of experience. More cash in the game (lower LTV), strong credit and/or cash reserves, etc. It is not impossible, but don't expect the same terms/conditions as someone who has been successfully doing this for years.

Not typically.  Maybe you are thinking of a commitment letter.  Many lenders will issue a letter outlining the terms they are willing to provide, usually subject to certain items like appraisal, title, etc.  At closing, you will sign 'normal' closing documents like the deed of trust (or mortgage), note, etc.

First step would be to discuss with existing lender to see if they have a solution.  If not, you need to confirm whether or not they will allow a 2nd lien.  Some lenders will, some won't.  From here, you can decide which way to go.  Maybe a new lender who takes out the first and provides the necessary rehab funds, or maybe a 2nd lien lender or equity provider who will come in behind the existing first.

Most hard money lenders can move quickly, in some cases, a matter of days.  As long as you are confident in your credit/experience history, you should be able to move forward on securing a deal and then reaching out to your lender.  With that said, it wouldn't hurt to have one or two lenders lined up in advance.  Note, things like title and appraisal are out of the lender's hands when it comes to timing.  Don't put yourself behind the 8-ball from a timing standpoint with your wholesaler.

I guess I'm more conservative than others.  I would aggressively pay off the student loans while I continue my real estate investing education.

Yasha, you just need to contact a few and ask questions.  People here might be able to make referrals if you tell them where you are.  Beware of any lenders requiring upfront fees or offering ambiguous terms.  I know it is a bit cliche, but the best lender for someone else is not necessarily the best lender for you.

A hard money lender will be more flexible but it will cost more.  If you can handle the cost for a few months, then you can refinance with the bank once your job starts.

It depends on your (and your relative's) risk profile. You could bring them in as a lender where you pay an interest rate either current or accruing, and then return the principal when the house is sold or refi'd. Bringing him in as a partner (or LLC member), you both share the risk of loss and a 50/50 or 60/40 split might be more in line. It is not uncommon for a preferred return to be paid to the equity as well. This would be paid before any profit splits.

Having them as a tenant in 75% of the space is great, but if they can't lease the balance of the space, obviously, cash flow will suffer.  Study the proforma, and understand the assumptions before making your final decision.  Some things to look at:

1. Are they leasing at market (you already answered this one above).

2. What sort of vacancy factor are they using?  Is it in line with the submarket?  You don't want to run numbers based on 95% occupancy if the submarket is 80%.

3. What sort of fees are they assuming? (property management, asset management, etc.)  Are any of these fees being paid to the company?

4. You want to understand the operating expense assumptions (less important if it is a triple net building)

5. Make sure adequate CAPEX is budgeted throughout the hold (Tenant Improvements, Lease Commissions, and Building Improvements.

6. What is the partnership structure?  Are you comfortable with the promote structure?

Good luck!