All Forum Posts by: Mike Klarman

Most Private lenders do not do 30 yr DSCR. They like quick capital turnaround.

The best step 4 option is a local credit union in the market you are in. They will be 3/4 of a point lower than any HML. You may need to open a bank account there and maybe hold some money in it, but you'll get the best rate and they usually have 20 or 25 yr mortgages.

If you own it, you can sell it for $1 or 1 million and if you own a rental you can charge anything from no rent up to whatever you want.

If you mean "advertise" one price for military and one price for civilians, yes that's fine I'd say.  I do not think military service is one of those bias criteria like race, religion, political affiliation, etc.  

I kind of relate the sourcing of projects to a sports draft.  Some picks work out, some do not, but there's lots of interest by the entire league on any high value targets which we know drives up price.

It will be difficult to get any kind of deal flow using MLS properties. In most markets, the margin between the purchase and resale isn't cushiony enough to support the capital risk.

As far as wholesalers go, it has to be the right wholesaler.  Sometimes with the wholesale fee included you are near market price, and wholesale properties are as-is sales and I've never had a client take on a wholesale property where there wasn't hidden problems.  You have to watch Wholesaler ARVs too.  They always give you the highest comps and then you use the highest comps in your calculations.

No.  McDonald's advertises too.  They do not struggle.

Who are there customers?  Investors and potential investors.  Investors have their lender, so it is their job to try and take them away somehow, meanwhile other outfits try to lure theirs away.  Then we have the potential investors, investors with 0 exp.  Risky, but it is a large customer pool and some may be turned into consistent clients.  

Think about all the horror stories we hear on here at BP, there's always disgruntled investors with their lenders.  

Texas isn't on anyone's do not lend list. So anyone can usually offer lending there.  if you want an intro to a local hard money lender I'd ask some local agents.

There's places that will cross collateralize the deal using part cash and a property or two.  Problem is, for a deal like this, you really can't let the lender know you are struggling with the capital cause that's a red flag for them.  You will need to find 20% (200k), plus closing costs (25k?), plus they will want to see that you have 6 - 9 payments in the bank (75k?)

This deal may cost 300k in liquid capital reserves. 

The hardest part will always be sourcing a property worthy of a hard money loan.  Not every property is.  How many investors are out there using A.I, using virtual assistants, using skip tracing, using social media to find the best deals.  Lots of people looking for that great buy.

If a lender turns your deal down, odds are they are doing you a favor.  Are they really turning away a deal where the investor crushes it?  No.  They know if you crush it you are coming right back with another.  

The BRRRR as a strategy works sometimes, and other times it financially crushes the investor and ruins their credit. It's the difference between a rule and a principle. A rule states do this and you get this result, a principle states when this is done effectively it has worked before. That's why in painting, and in writing, and other art forms there are no rules, only principles. if there were rules, anyone could paint, write, act, sing. But there are no rules, just principles.

I say this because the books, podcasts and what not make this sound very, very easy and it is not at all. If you do the BRRRR and your asset choice is off, your math is off, your contractor lets you down, your agent was all talk at the start and now he/she can't sell it, if any one of these things happen, you will probably lose money, question is how much.

Steve, I'm sure you know the advantages of the S-Corp!  I'd distribute profit that way, when it comes!

They hand out pre-approvals like candy at times, what is the name of the lender? It can be a broker, who can write up his own letter. I've written letters for investors I've closed with all the time. Sometimes, an investor needs a POF letter to submit with the offer and if it's a repeat client I just write one up.

What is your credit roughly and what market are you looking in, and what price point?  I can give you a sense of the terms you can expect.

I as well, when I broker to them I usually can get bridge loans closed in 3 weeks if title and insurance do not lag.

I had said this before, it's rare that an entire lending outfit is bad.  It's more the contact you are dealing with.  When I am in charge of someone's loan, it's on me to deal with my rep at the lender and I have a great relationships with my reps and I have been through every kind of scenario there is at this point and I find many, many flaws I have the borrower fix even before we submit, I also take the charge on title and insurance because I know they can cause delays if not done right.  Someone who has closed 100s of bridge loans as a loan officer or broker, should be able to hold your hand and take you painlessly to the finish line.

I will say, I have done like a dozen condo refis/bridge loans over the years. They rarely run smoothly, they have extra docs that are needed and that HOA fee really digs into the DSCR and the condo needs to be warrantable and there's guidelines on how many of the condos can be investor owned and how many can be owner occupied. Lot's of red tape with condos. I'm doing a condo refi right now for a Canadian client who owns a unit in a FL condo building. It will take at least 6 weeks to close. I wait for title, I wait for HOA to get me the master insurance policy, there's a condo questionnaire that needs to be filled out by the HOA. You wanna pull your hair out? Try calling an HOA and don't stop until a human picks up. You'll be in a straight jacket by weeks ends.

You can be a hybrid buyer.  You can buy for cash and then go to the lender after the fact.  You have 6 months post purchase to apply for a bridge loan and get cashed out of the property and receive rehab funds.  Cash will always get you the best price so you may as well take advantage of it and get ahead of the game.

But yes, Hard Money is useful if:

1) You have the operating capital to always fill in low cashflow cycles and afford to always have capital tied up in property.

2) You are in the right projects, your choice for investment is good. You stay under 70% project cost to ARV which allows for the best terms

3) You have a good team you can trust who rehabs and sells for you in a timely manner with quality results

4) Keep your credit north of 700 for best rates