All Forum Posts by: Aaron Norris

If he's doing this to you, can you imagine what he's doing to others?! I would run far, far away. It's probably only a matter of time before things get much more serious and I can't imagine you would enjoy your hard-earned reputation being commingled with his.

Armando C., welcome. We too are in Riverside. I agree with David Doyle, there are a number of local clubs that are networking and education focused. You're in a good spot because you're close to several. If you need anything, let me know.

Nice website Glenn Espinosa

Have you checked to see if the utility company has any rebates to help cover the cost of old pool equipment to newer energy efficient? You might get people to pay more but the appraisal won't give you credit for it. Filling in pools and/or jacuzzi properly is more expense I've heard. Permits, right?

As a hard money lender, we always tell people to max out conventional financing first. After that, we often less expensive, and less hassle, than having an equity partner. Instead of worrying about raising money, you focus on deals.

Sean Brennan, that will totally depend on your arrangement and how much money you personally have in the deal and if you're making hard money payments. I'd say as long as it ends up being a 50/50 split in money out of your pocket and labor/materials on the GC side, I think that could work.

Great point David Robertson. I wonder if there's a class of cars that are in between. I don't think showing up to a rental in a BMW is necessarily a good idea but meeting a private money investor in one would. It really depends on your core business. Most of our most successful real estate pros don't drive a super fancy car out in the field. We have one friend that finally gave up his truck at 500,000 miles.

I agree with what Mike is saying but your contractor might be able to save you a ton of money on the construction costs because of inside connections and cheaper costs on materials. Just a thought since he's potentially an equity partner. You might be able to get more aggressive for the purchase price. Otherwise, the 70% minus repairs is definitely a good starting point.

For our hard money loans in California we often roll in repair money and do two releases. The contractor, under Mike LaCava's scenario, would be out-of-pocket 50% and would send in pictures when the repairs are 50% complete to get 50% of the repair money out of escrow. Then he'd complete the next 50% out-of-pocket and then only get the final release of money when an inspection of work has been completed. An arrangement like that might be perfect for you because it's an extra set of experienced eyeballs on the project to make sure the work is getting done. If it's not and the contractor walks away, at least not all the money for repairs would be gone. I see you're in Mass. so have no idea what hard money is like out there.

If your contractor has no money, I'd be a little concerned for you. I'd prefer to see you hire a general contractor for a few days and come up with some project templates, cost breakdowns, likely issues with houses in your area, etc. From there, perhaps there's a bonus with some share of equity but not 50/50. I think it depends on what he's bringing to the party.

Good to clarify. That just means the buyers is bringing in extra cash to make up the difference. Once that is booked as the sale price, it's a new comp.

@k. marie, so sorry I didn't see your question. When we're being introduced to a new borrower, liquidity is #1 and credit is actually a distant second. We're not qualifying like a regular lender because these borrowers often only do real estate so don't have standard pay stubs to show us. What else do we have to go on. In our opinion, yes, the deal is of course really important. But what if we put the borrower with a great deal in a position where they are bound to fail?

At the end of the day, we have to not just market a deal but also the borrower, especially when they are new. Let me also clarify reserves. We've adopted the term "liquid working capital." We're not looking for "6 months of living expense reserves." It's more like for every $100k they want to borrow, we want to see they have $30k in liquid working capital to operte properly as a business. We all have cash flow needs as businesses.

That capital goes for things like points, downpayment, and rehab costs. Not to mention the occassional "uh oh" that often happens during a project. If they have no money or working capital, we'd be setting them up to fail.

Our private money wants interest checks, not houses. I know other lenders operate differently. I think that's why hard money lenders have a bad reputation. If we set the borrower up to fail and the lender to lose an interest check and then they have to deal with the foreclosure, chances are good we lose both as clients. We like to think more strategic and long term.

We don't specialize in creative financing including cross collateralization or equity sharing. We're sort of boring but higher volume. Shops that do specialize in that would be willing to do higher up to 100%. However, the borrower loses some control and they're adopting a business partner and not just getting money. However, I still bet those shops want to see that that borrower doesn't have maxed out credit cards, a 400 FICO, and a history of not finishing what they start.