All Forum Posts by: Nick Wing

@Kevin Hart I would do a  preliminary research of lenders and get an idea of how a few work. Understand their underwriting loan guidelines, what they will require you to put down, how fast they can fund, their fees. Do not be afraid to ask a lot of questions to understand as thoroughly as possible (trust me do not be embarrassed to ask dumb questions, EVERYONE started somewhere, no one was born with this knowledge). 

When you get very close to getting a property in contract, or do get one in contract, then contact the lender. Some lenders may require that you have it in contract. Lenders will not like to analyze and look at deals you have if something is not going to progress from them. This will waste their time, resources and tarnish their willingness to look at your future deals! People have lost credibility with me as they send me deals that they are sure they will get, we use resources to run values and send a proposal only to find out that they are not going to move forward with the purchase. PM me if you have any questions, I can do the best of my ability to answer!

Originally posted by @Gerald Harris:

@Nick Wing 

 Kevin is a New Investor

Taking on a Hard Money Loan even its its a sweet deal is risky.   There are factors that come into play when taking on a Hard Money Loan.   I understand they take the property into account but if he isn't careful he could hurt himself and is credit.   You sound seasoned/experienced.   Maybe you contact Kevin and guide him through the process so that he doesn't make that mistake.   Help him to understand what a draw is so that he doesn't hurt himself.  

 Well again, I would not use the word risky to describe the use of hard money or any loan. If the numbers are ran correctly, you can see how the cost of the loan will be factored. The only way I could see a hard money loan described as being "risky", is if the borrower miscalculates, gets too short of a term, then it becomes a race against time to complete the project. However, that would be an error in the project planning.

@Gerald Harris why would you say a private lender is less painful than a hard money lender. If you select a hard money lender with a good reputation that knows what they are doing, the transaction will be very smooth and painless. 

Working with Hard Money should not be looked at as risky. However I understand that there is a time frame in which the project needs to be completed. If you do obtain a hard money loan, make sure you are comfortable with the term length. Would 12-24 months should be a sufficient time to get the flip done? The cost of the loan should always be factored into your numbers before you make the purchase. Do not just factor in the cost of the loan for 6 months, factor it in for a project that might take up to 12 months or for a worst case scenario. On our flips, we factor in 10 months of financing, however our average project from purchase to sale close is 120-140 Days. 

As for exit strategies, a. See if a conventional lender will refi you out.  b. See if the lender will give you an extension, there will most likely be a fee but you can always negotiate c. wholesale the deal to another investor, possibly a buy and hold person. 

If you can get traditional financing, that may be a cheaper option, but you running the risk of loosing the deal because they may not approve of the condition of the property, or may take too long to close. 

Maybe he should purchase some rental properties, and some notes with high interest rates to keep his investing diversified. I see performing notes with high interest rates as better than a rental. Dealing with a borrower vs. a renter would be less of a headache. We have experience with both. Worse case scenario with a borrower, is they stop paying and you foreclose, with a tenant, they stop paying and you evict. However when evicting you also risk the tenant damaging the property. When foreclosing, if the loan to value was evaluated in a safe manner, you should have enough equity in the house to fix it and sell it without loosing any capital. 

I agree with @Jeffrey Reyes . It is important to look at the borrower, just as any other lender would look at willingness and ability to pay back the loan. And yes the lender should analyze the entire deal with the borrower in mind. If it is not a good deal for the borrower, the lender should advise their client that maybe they should stay away from the deal. Most lenders are good and are in the business to make successful loans not in the business to foreclose on a property ("loan to own" as some call it). 

Feel how you want to feel, give your opinion, however THERE ARE lenders that provide non-recourse loans (Not us). You may need great credit, a proven track record, and money in the bank, but the loan will be non-recourse. 

Depending on the hard money lender and state some loans will be non or full recourse. A personal guarantee is asked for on full recourse loans if the loan is in the name if an entity. If a foreclosure from a HML you may not worry about a deficiency judgement as the loan should be at a low enough LTV to cover the principal and interest.

Sorry I missed this month guy! I look forward to the next one!

@Norma Cole @Arlan Potter I am unsure about Georgia, but in California, SFR stands for Single Family Residential. Also, from what my commercial agents in California have told me about Loopnet, is that if it is on Loopnet, seasoned investors have already passed on it. Look for a partner out there to start working with that has knowledge about the market. Be ready to bring something to the table (ie. the deal, the money, the construction crew, the management, etc. ) We found a few partners out of state, the partnerships have been working out great. Good Luck! Come out to the LAREIA in Arcadia (121 Alice St., Arcadia CA 6:30 -9) tomorrow, you will learn a great deal about investing, and there are plenty of people there that have experience investing out of state! I will be there, hope to see you as well.

Do you watch American Greed? Wow, some of these scammers are able to raise more funds than the legitimate guys. Gives us hard money lenders a bad name!