All Forum Posts by: Michael Kinsella

Congrats on a successful fix and flip Justin!

What was the time frame from purchase to sale?

Hi Derek,

The short answer to your question is yes, hard money can be used to fund a wholesale deal.

The term you'll see mentioned frequently with respect to this scenario is 'transactional funding'.

Best,

Michael

Hi Matthew,

Since there is no sale price listed, I assume you are in the midst of this one?

How is the rehab going thus far?

Best,

Michael

I like @Michael Anderson's answer.

Two big advantages you can offer to local investors as a private lender are 1) reliability of execution and 2) speed.

Meeting local investors at REIA events will create greater trust than simply advertising your services online.

People are rightfully skeptical of private lenders, so meeting real estate investors in person and letting them know you are local and actively lending is a great first step to gaining trust.

Once you execute well on several deals, word-of-mouth, the most powerful form of marketing (and the only one that compounds) can provide you a substantial tailwind.

Best,

Michael

Hi Sam,

In brief, it depends on the lender.

Some will take issue with it and some will not.

In my experience, HMLs are much more likely to be concerned with things like,

1) The deal (purchase price, as-is value, rehab amount, after-repair value, available comps)

2) Your financials (liquidity, FICO score, etc.)

3) Your comparable project experience (how many fix & flips have you recently (say within the last 2-3 years) completed?)

To find out, generate a list of hard money lenders, begin conversations with some, and see which ones are open to financing your project.

You can start to create a list of prospective HMLs on BiggerPockets through,

Network (on the top navigation menu) --> Hard Money Lenders -- Filter by state (TX)

Best,

Michael

Well done!

It sounds like a very successful local investment.

Hi Gary,

It sounds like you are well organized, which is very helpful when it comes to the document production portion of the lending process.

You're likely to face two primary hurdles, even when speaking to HMLs, who are categorically more lenient than banks, or traditional lenders (although seemingly becoming more stringent over time).

Hurdle 1: Property type (barndominium)

Hurdle 2: I just googled the population of Rockford, MI and I got 6,175. The relatively low population is going to put this property in the rural bucket, which will be objectionable for some lenders.

Given the above two points, you'll likely need to speak with a larger number of lenders than a real estate investor who is looking at a straightforward SFR in a well-populated area.

Nonetheless, please see below for a few ways to curate a list of HMLs.

1) BiggerPockets --> Network --> Hard Money Lenders --> Filter by state (Michigan)

2) Local REIA/meetup events, where you can get referrals from local investors and network with HML reps.

3) Google "Hard money lenders Rockford, Michigan" and explore the results.

Best,

Michael

Hi Stephen,

Given that you're new to BP and to real estate investing more generally, it would probably be helpful to attend some local REIA events or real estate investing events.

At those, you can speak with other, more experienced investors about who they have used to finance their deals.

You will learn about reputable local lenders, e.g. local banks, HMLs, private lenders, and get a better overall idea of the current lending environment.

Best,

Michael

@Randall Re II I think this is a sound perspective.

I'll also add that it can be helpful to make a true apples-to-apples comparison with respect to your cost of capital.

Many investors will look at just the interest rate when comparing lending options, some will look at the interest rate and points, and the most sophisticated investors will take a holistic view, or examine the total cost of capital.

The total cost of capital includes not only the interest rate and points, but also the pre-closing costs and fees associated with the loan.

Examining all cost variables allows you to make a true comparison between lender quotes.

Nice post!

Chris,

Others in this thread have offered some reasonable suggestions.

To summarize,

1) Have you spoken with your current HML? As @Jacob Sloop mentioned above, HMLs sometimes offer extensions in exchange for a fee. For example, a HML may charge you 1% to extend the loan term for another 6 mo's.

2) As @Scott E. said above, a DSCR loan is another option. A non-bank lender with a DSCR program is likely to be more flexible than a traditional lender.

Best,

Michael