All Forum Posts by: Kevin M Finley

Questions for Private Lenders!

I am putting together a lending proposal template at the moment and would like input! Essentially, this is a PDF document that serves as a full proposal, including information about myself, project information, photos, budget, scope of work, comps. It then includes proposed terms and conditions and a breakdown of what that looks like. It also includes a few samples of previous projects and what was paid to lenders etc.

Please let me know what additional information you might like to see added. If you would be interested in giving more in depth feedback on my proposal template, please comment or message me an email address and I can send it over.

I pay 2/12 and offer first position to my private lenders if that helps. I wouldn't consider asking for a 2nd position. 

I'm assuming you're talking about HUD homes that are exclusively offered to first time home buyers. I purchased one of these with a 203k loan and now live in it.

I did not "flip it" but I completely renovated it and then refinanced, giving me a little nest egg to cover down payment and renovation costs on flips. 

It worked out well for me, and to my knowledge, the only stipulation is that you must owner occupy the home for one year. I do not know what their verification process is. 

Additionally, and coming back to it now, their appraisal process is questionable at best. Here are my two properties: 

Property 1: 

My estimate ARV: $229,000

Private appraisal: $224,000

FACO Appraisal: $152,400

Property 2: 

My estimate ARV: $169,900

Private Appraisal: $172,000

FACO Appraisal: $150,000

When they lend 70% ARV, it's no problem until their numbers are 15-45% lower than they should be... so you cut a few bucks out of the renovation budget and I front it... no big deal right? It's not like you can hurry up and cash out the escrow... they pro-rate each renovation category based on percentage of TOTAL BUDGET. ie if I decide to go through and do $20k worth of work right away (roof, windows, siding), they will only give me a draw for the corresponding percentage of my escrow budget. This causes the investor to slowly end up in the hole over the course of a renovation WHILE paying interest on money they don't have.

Ask me how I know. 

UPDATE AGAIN: 

DO NOT USE FOA COMMERCIAL FOR ANY REASON WHATSOEVER. 

My two flips with them are a nightmare. One I am finishing up now and basically funding the entire renovation out of my pocket because their draw system is so effing terrible. 

The other flip has been on hold for 90 days now and I am refinancing out through a joint venture and private money. Their incompetence is costing me a good chunk of my profits, a ton of holding costs, my time, and my sanity. 

Update: 

Because of shockingly low appraisals and a nearly impossible draw schedule, I have had to put one of my renovations on hold because they are not paying out how you would think they would. It's a long story but frustrating. 

On my other property I got the roof done, paid my guys, and then submitted a draw request for the roof $8500. The inspector came out the next day and then 7 days went by. I called every single person at FOA I had a number for and no one answered. Finally, on day 9 I was told that they couldn't close my loan becuase of outstanding conditions... THE LOAN IS ALREADY CLOSED I JUST WANT A DRAW. On day 11 the money finally arrived in my account. 

Last week I got a notice from them that I was to be charged $640 per month for property insurance because my insurance had lapsed. MY INSURANCE HASN'T LAPSED. Another angry phone call to get that cleared. 

My costs on top of the loan costs using FOA are piling up. At this point it is basically hard money costs. In addition to the points and fees etc, I am paying: extra CC interest, personal loan interest, a 2017 tax late fee because they didn't fund until July 1 instead of June 29 so the city hit me with another fee, and $700 in extensions from a seller. 

DO NOT USE FOA COMMERCIAL. 

Typically hard money lenders will not allow you to live in a flip. FHA 203k may be an option but they are a nightmare.

If you're not going to move in until after the rehab, a hard money loan refi'd into a conventional may be your best bet. 

I factor 1.5x whatever my contractor says, another 20 days for BS time, 10 days on the market, and 45 days to close. 

For a fix and flip I usually plan for 145 days or so. A full gut rehab is scope and permit dependent but anywhere from 180-250 days. 

I don't have kids, but I tried to do as you are saying... and things took a little longer than expected... 

I didn't have countertops for 3 weeks, my only sink was in the bathroom, and my only shower was in the other bathroom... and I used roofing paper as a shower curtain for a few days before my door came in. 

It was super stressful. After that it was fine because I finished a few rooms really quick and they were my "real person" rooms I could go in and not feel like I was camping. My advice would be to set aside quiet places and give yourself a buffer to make sure your creature comforts are completed before you move in. My lease was up and I didn't have a choice. 

Specifically in my area, this is extremely common. The foreclosure process involves immediate winterization and they turn off the power and also the sump pumps. Sump pump overflows in the spring and voila. 2 months later they decide to turn on the electricity and drain the basement, they then leave the house closed up all summer with moisture in the basement. Depending on the management company or contracted broker, they MIGHT throw a dehumidifier down there and never empty the tank. 

It's always the exact same story... and was such on my personal home. 

We demo'd all porous materials and got it down to straight concrete. Concentrated bleach, a garden hose, and a scrub brush made quick work of the mold on the concrete. Mold armor for porous materials was used on the joists above. I then sprayed two coats of mold killing, watertight primer on the walls, and a slightly different product for the ceiling. It's been over two years and I haven't had a hint of moisture and no odors to speak of. 

Note: It was tested, but not reported. It looked just like the photos above, but was penicillin, which is harmless until messed with. Wear masks.