All Forum Posts by: Michael Kinsella

Credit requirements will vary by lender, with HMLs (hard money lenders) historically having less stringent credit score requirements.

Many HMLs, but not all, will stipulate that you close under an entity.

The best starting point is to speak with some prospective HMLs.

Here are a few routes...

1. Network --> Hard Money Lenders on BiggerPockets

2. Attend local REIA events to network with other investors and HML reps.

For my next flip, a friend mentioned using DSCR first, then if dscr not available, a bridge.

DSCR "Debt Service Coverage Ratio" loans are intended for stabilized properties. They are long-term in nature.

Bridge loans are generally, although not always, intended for properties that need to be improved or somehow repositioned. They are short-term in nature.

Hard money has not required me to put any money down but looks like dscr does. 

It is highly unusual to find a hard money lender that doesn't require money down.

DSCR loan products generally include a cash-out refinance option, in which you may be able to pull cash out of a property.

Also seeing prepayment penalties for dscr.

All long-term products I've seen in this space have a step-down prepayment penalty, e.g. 5/4/3/2/1.

Not sure how to use a bridge for a flip.

Loan products intended for a fix and flip, or acquisition, renovation, and sale of a property, could fall under 'bridge' financing. When you think "bridge", it's probably most helpful to think of "short-term financing" to some exit, typically a sale of the subject property, or a refinance of the bridge loan.

@Andre Garbo

A few good starting points...

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

2. Local REIAs for networking with local HML reps & local investors. It's possible you meet an individual private lender at these events who might be interested as well.

Best,

Michael

I'm coming at this from the lending side, so bear that in mind.

I was curious to know what are some of the strategies and struggles that you use and face when it comes to financing your properties? Whether it's hard money, private money or the traditional lending route; what are some things that you have experienced that you could pass along to help the next person?

From the lending side, there are two things that I would suggest.

1. Be as organized as you can.

Breaking this down further, a lot of the financing process is about document production; the more organized you are and the more easily you can produce accurate, complete info/documentation, the smoother the process will be.

2. Understand the numbers.

Many first-time or new borrowers will look only at the interest rate when comparing financing quotes. This is only part of the picture with regards to cost of capital.

You want to look at the total cost of capital, which includes other items such as the origination points and pre-closing/closing costs. Including these items in your cost calculation will allow you to get a more complete picture of the financing and also allow you to make an apples-to-apples comparison with regards to cost amongst prospective lenders.

3. Understand your exit.

If it's a sale, then get a good idea of what the property is likely to sell for and also the market velocity (how quickly properties are selling).

If it's a refinance, then try to get a good handle on lenders that may be able to handle that, as well as the credit, seasoning (how long the property has been rented out for), and other requirements.

Congrats on a great deal! Also, definitely a solid lesson learned with the contractor.

What @Chris Seveney said is correct.

Even when lenders advertise "up to 100% LTC", it's generally not what new investors have in mind.

100% financing from a HML means that you may still need to cover closing costs and will almost certainly have to provide the initial capital outlay for the renovation work, which is typically funded on a reimbursement basis.

Two good starting points in your HML search...

1. The Network --> Hard Money Lenders tab on BiggerPockets where you can filter by state.

2. Local REIA events which typically have HML reps and other investors who have used HMLs in attendance.

Best,

Michael

Two good starting points...

1. Network --> Hard Money Lenders tab on BiggerPockets where you can filter by state.

2. Local REIA events, which typically have both HML reps and other investors from which you can gather referrals.

Best,

Michael

Congrats!

What was the rehab cost?

A couple of good starting points...

1. The Network --> Hard Money Lenders tab on BiggerPockets allows you to filter by state.

2. Your local REIA events will likely have both other investors and local HML reps.

Best,

Michael