All Forum Posts by: Michael Kinsella

Congrats on adding to your portfolio!

Local real estate investor groups, as @Andrew Postell mentioned, are probably the best place to find reputable private lenders near you, or at least a referral to one.

Local REIA events, meetups, etc.

I don't really watch them, but from the few I've seen, they kind of gloss over the financing side of things.

They'll often articulate the project costs in brief, e.g.,

Purchase price: $100K

Renovation costs: $50K

ARV: $220K

Profit: $70K!

That's just not realistically how the numbers work out.

Many investors get financing for their projects, and there are often significant costs associated with renovation loans.

Also, it seems like they often exclude carrying costs if the investor isn't able to sell the property immediately.

My perception has been they try to smooth everything out to make it more palatable for the viewership, but they lose some of the reality in the process.

Any advice for finding private money lenders or hard money lenders to help cover the down payment?

I would forget HMLs for this specific case, as many of them are likely to stipulate they must be in the "1st and only position". Also, they'll generally want to see at least some skin in the game.

I see two possible solutions,

1) Seller 2nd financing

2) Private money individual 2nd financing

You'll definitely want to consult your lender/counsel to be sure that obtaining subordinate financing won't trip any loan causes, or cause any issues with the 1st position lender.

With that said, speaking with individuals at local REIA events/local investor meetups is a good way to find individual PMLs.

You can also speak with other investors at those events and see if they recommend any local individual PMLs.

Best,

Michael

(1) What are the current hard money and/or line of credit rates (12/27/22)?

There is often a sort of sliding scale that lenders will apply based on a number of underwriting criteria, e.g.;

- Experience (# of investment properties sold, or comparable projects completed within a given timeframe, like the last 3 years)

- Credit score (generally the higher the score, the lower the rate available)

- Leverage (LTC/LTV - generally the higher the leverage, the higher the rate)

The above list is by no means exhaustive, and the elements will vary by lender.

With that said, typical short-term HML interest rates right now are likely to be somewhere between the high single digits, like 9%, and the mid 10's, like 14-15%.

Also, HMLs typically charge a couple of origination points.

(3) Lastly, are there other recommendations from the BP brain-trust that are all welcomed and thanks in advance?

Try local investor referrals, for example at meetup events.

Investors who have had experience with various Tennessee lenders are likely to be able to point you in the right direction.

They can provide experiential as opposed to speculative guidance.

Best,
Michael

Congrats @Erik McElhinney - substantial profit margin!

Congrats on a successful flip!

"The property was vacant, so it's existing value is tops 50k, but it needs say 120k worth of construction. ARV should be 200k+..."

As @Tarik Turner mentioned, that's a very heavy rehab compared to the as-is value. Some lenders will take issue with that, and others won't. As such, you may need to speak with a greater number of lenders to find some who are comfortable with this.

"I have good credit, but not money in the bank (personally) which is why I was looking for hard money, not something based on my personal statement."

Typically, liquidity is an important measure for hard money lenders who are financing renovation projects. A rule of thumb (though not hard and fast) is to have 1/3rd of the requested loan amount liquid for a fix & flip financing request. The reason for this is the property is not rented out, and thus the rental income will not be servicing the debt. Credit score varies in its importance lender to lender. 

In sum, you'll likely need to speak with more lenders than another borrower who has a lighter scope of work and solid liquidity. 

Two reasonable starting points,

1) BiggerPockets --> Network --> Hard Money Lenders --> Filter by State

2) Local REIA or investing events, where you can network with other investors and local HML reps.

Best,

Michael

Hi @Kim Musgrave,

Try the Network tab on BiggerPockets. From there, click Hard Money Lenders and then Filter by State.

That should give you some additional names.

Best,

Michael

@Quentin Chambers

A few ways to start to get some HMLs lined up...

1. BiggerPockets --> Network --> Hard Money Lenders --> Filter by state

2. Local investors should have good insight as to which HMLs are reliable. 

With respect to the property, HMLs are likely going to want to understand;

1. Purchase price

2. $ put into the project

3. Remaining budget/scope of work $

4. ARV

Keep us updated on getting this one completed and rented out!