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All Forum Posts by: George Despotopoulos

George Despotopoulos has started 3 posts and replied 859 times.

Post: Financing first rental property

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

@Oriol Serra I would set-up a preliminary meeting with a big bank and also a local community bank. Be up front with them and tell them you're not ready to take out a loan but are planning for it. Get the requirements and expectations down. Do what you have to do now to not only make their life easier down the road but also to enable you to obtain the lowest rates and best terms possible for yourself. 

Banks definitely want to see assets and income. But see what the requirements are and learn if you can supplement with anything. Community banks and credit unions are definitely more flexible so make sure to have talks with the most stringent of institutions and the more reasonable ones too. See what is do-able for you and what you can foresee yourself actually going through with. 

Another avenue to explore are local real estate investment groups and forums like these. Link up with more experienced individuals. Compare deals (you do not have to give property info) and see if you're on the right path. Perhaps you can propose working together with someone or talk to friends/family and show them your analysis. Maybe they would be interested.

Too bad you can't be a NINJA like @Marc Yu said! 

Post: difficulties getting hard money loans

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

Hi @Account Closed with hard money, expect less of an emphasis on your credit score and really no check on your personal income. 

What will help you obtain hard money financing are your experience in the space (fix & flipping or rehabbing), the property's value, and your plan to improve said value. Market conditions play a role as well. Everything else is secondary. Usually prudent lenders in this space will require to see a business plan of sorts, to verify you have the experience or wherewithal to execute this project. This is especially true if they're funding a portion of the rehab. If rehab is being financed, expect this to be disbursed at intervals upon submission of certain documents the lender will request. This varies but this is the general gist of things. 

Of course if you have any major red flags on a credit report or background check it will either lead to disqualify you from obtaining financing or increase your rate and perhaps the fees associated with closing. 

Even with rental property loans and private lenders in that space, the focus with non-bank lenders is on the rental property's income and your experience. Credit plays a little more of a factor there and expect to see an increase in your rate for a poor credit score. But, there is no personal income check. The good thing is if you have ownership or management experience you can be credited and this will decrease you rent.

Hope this cleared up some confusion. Feel free to let me know if you have any questions!

Post: Can tenants move extra people in after lease?

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

Typically they are allowed to have some stay over. But if you see this person as a resident or inhabitant of the premises then you run into some concerns. You would want anyone residing in the premises to be on the lease or else you should move forward against the tenant(s) of record. 

Month to month or yearly does not make a difference.

I do not know what state you're in but in NY evicting a tenant is not the easiest thing to do. Typically takes at least 6-8 months to get through the court system if you're proactive. 

Whether they are in breach of a code or not does not really change things as the moment they have an occupant in the premises that is not in the lease they are already in breach. You would proceed accordingly. Perhaps that fact gives you more leverage and your attorney could raise that to the judge but that depends on your courts and I am not familiar with that. 

Please consult local counsel. This is merely my opinion and not legal advice, nor does it create an attorney-client relationship.

Post: How much out of pocket money to buy a house?

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

Hi @Pablo Hernandez all good, it seems simple from the outside, and then you get working and there are so many variables. It can be overwhelming. You'll definitely need to struggle through everything until you have a firm grasp. Keep asking questions and do some reading, listen to some podcasts. Although, listen to the right podcasts would be more appropriate advice. I've heard too many success stories on 1.5 hour podcasts. You get sucked into thinking it's easy work or simple. 

I can only speak to my experiences and practices. Usually we speak in terms of LTV not ARV, especially with a new investor to fix & flip, I really would not take the ARV. This is because you're new and no matter how much research you've done, talking to tradesman and industry insiders, tv shows you've watched, etc., when it's time to put it all together it will be on you. Everyone is busy, including mentors, unless they have equity/capital at stake.

Is the lender you're using a reputable company? Is it a friend or someone referred? Or did you just happen to find them through an online search. 

I ask because when I speak to new investors I like to walk them through our whole process. I explain to them the fees generally expected for closing in the property's locale. This includes closing costs, appraisal fee, our origination fee. 

Usually on hard money, it's 75% LTV, this is my experience only and others may differ, especially since some cover the rehab. Note, the money for rehab isn't given upfront, usually it's after a certain time-period or scope of work is completed and all invoices/receipts are submitted to the lender for their approval and disbursement.

I would try to look up a local real estate investors group to join or attend a meeting, also look up investors on biggerpockets from your area of investing, talk to them about the various fees with a lender as well with investment property ownership. Also, perhaps touch base with appraisers in your area to get a quote and perhaps speak to some title companies near you and/or the property you're investing in. I've never done this, so take it for what it's worth, perhaps they will be happy to lend some advice and give you cost estimates. At the very least I know title company some time put on seminars and workshops, ask/email around for some of those to attend too. 

For your first flip I would start small if possible. Do not overextend yourself and struggle to buy a property where all your cash, or most of it, is going to the down-payment. You need the experience to help you not only with subsequent deals but obtain better rates. The more successful flips under your belt the better terms you'll be seeing from lenders.

Feel free to reply or reach out directly through a private message or at the below contact info.

Post: Looking for private lender recommendations

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

Hi @Martha Daisley

Congrats! Those two properties should help you to pre-qualify with a lender and will help propel you forward!

Private lender has a few different definitions on the forum. It seems the most appropriate is to designate an individual who lends out personal money as 'private lender.' But, I've also seen non-bank direct lenders referred to in this way as well.

Nonetheless, typically when you go the private lender route you're looking at more traditionally structured loans with rates higher than those from a bank. The fees should be modest and you will have a long time to pay it off. These loans may or may not carry a prepayment penalty as they are often long-term financing so refinancing comes 5-7 years down the line, or whenever the prepayment penalty period ends, to avoid paying further fees. 

Hard money is usually where you rate-refinance. The hard money process is quicker and more bare-bones, getting to closing usually is under 30 days. The lender will not require much from you and your credit score may not even play a factor in determining your rate (outside of any major debts). Hard money loans will typically be 6 or 12 month loans, with opportunities to extend this time-period for a certain % of the loan amount. These loans carry with them higher interest rates, most likely in the range of 10%-16%. The typical focus when underwriting hard money loans are your experience, the market the property is in, projected after repair value of the property, and the loan to value you're requesting. The higher LTV expect higher rates. In this area of lending, lenders usually require a showing of substantial experience in rehabbing or flipping. Sometimes they even require a business plan or some evidence that you have done your homework and can take on the project.

In order to utilize either of these products, you will need to pre-qualify like you have in the past with conventional lenders. The process is pretty much the same, it's the information that's required and underwriting that will differ greatly.

There's a bit to cover in terms of the process but I'm happy to field any questions or get on a call to further explain, contact info is in my profile  and below. 

Post: Cash Out Refinancing question

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

@Samuel Watts Are you only looking at traditional lenders? 

There are other lenders in the space with rates that fall below what hard money loans are charged and the period to refi is less than 6 months. 

The rates/fees will be higher than a bank's but underwriting guidelines differ, which allow you to pre-qual and cash-out refi based on other factors and in less time. 

Let me know if you have any questions, feel free to reach out.

Post: How can you tell a Private money lender is legitimate?

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

@Tom S. you are fast and have once again beat me to it.

@Christine Walsh and hopefully others reading this, upfront fees is a huge flag. 

Tom you're right, it's great to meet in person, but online-based lenders like us exist as well! I would say looking at the overall picture is prudent. Is there a website, a number to reach them, are they active in communities like BiggerPockets, would they be willing to do a web-video conference, etc., and other such factors should be considered. 

I would say new investors, who qualify for traditional financing, should definitely go the bank route. For now, the rates are low. While their process is a bit grueling, it's also a learning experience. 

Depending on the state the property is in I would do some research to see what sort of license is required of the lender, also read up on up to what they can, by law, charge you on late fees or upon default. 

Another thing, I would ask for a referral, either another borrower or a trusted and reputable company in the industry. Ask them what vendors they use or who their local counsel in the area of the property is and if you could email/speak with them (sometimes this isn't do-able, but worth a shot), anything to add legitimacy.

Post: Questions to ask a HM/PM lender

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

Hi @Account Closed 

First and foremost, what state are you in or rather what state are the properties you're looking to  invest. That will help discern some things and let you know a bit. 

When you speak with a lender you should learn about their process, how do they underwrite their loan, what are the major qualifying and disqualifying factors and criteria. 

Also, what are their fees. Do they have an application fee to begin underwriting the loan. What is the origination fee and any other fees they charge you. You should know upfront what it's going to cost you to close the loan. 

There are standard practices and, generally, fees, they do vary based on lender and on the borrower's qualities as well as the type of loan you're trying to obtain (hard money will be higher). Application fee is OK, it shouldn't be too high, and the origination fee should be paid only at, or out of, closing. 

If you're operating in a state that requires a license, then of course you need to be aware of that. 

Be wary of private/hard money lenders who will fund most of the deal. If it's too good to be true it usually is. Many times people are too eager to jump on those offers because they're hearing what they want to be and there are individuals out there that know this so they take advantage. 

There is a lot to cover, hope this is helpful, it's a starting point. 

Feel free to reach out with any questions! Here to help.

Post: Commercial Lenders vs Private Lenders & LLC utilization

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

Hi @Jonathan Dunn there are lenders in the space that can help you here. The rates will be a little higher than traditional lenders but underwriting guidelines differ, which allows you to obtain financing without giving up your investment vehicle to protect assets and curb liability.

I am not a fan of taking unnecessary risk. I would opine that you should not buy as an individual and then transfer to an LLC. If your lender does see this, they can call your note, essentially accelerating the debt you owe them, requiring you to pay in full, and if unable, foreclosing on the property. This will not only be a mental/emotional drain but a time and financial one as well. Not worth it.

I can't comment on how other lenders operate, we monitor 'our properties' meaning loans as an on-going policy. This would be a significant issue if we came across.

Post: approval for PML & HML

George Despotopoulos
Posted
  • Lender
  • New York, NY
  • Posts 935
  • Votes 274

Hi @Roupnel Pierre 

Definitely check out the various sections of BiggerPockets and reach out to Lenders. @John Thedford gives you a great starting point of things to be wary of and questions to ask. 

He is correct. Most will require you to put down at least 20-25% to have 'skin in the game.' This would mean that lenders go up to 75%-80% loan-to-value (of property). 

Terms do vary, but on hard money expect anywhere between 10%-14% and 6%-9% on private money/rental property loans. Factors that influence your rate are the LTV, the term you want (short term 6 month interest only, 5/1 arm, 30 yr fixed, etc ), and experience in the field.

Heed John's advice. Do not pay an advanced origination fee upfront, this is usually the bulk of where the lender makes their money on your deal. This should be paid at, or come out of, closing. If a lender is offering you terms that seem too good to be true, it's usually because it is. So always come back and compare with others.