All Forum Posts by: Patrick Prunty

@Kyle Mack

Plenty of hard money lenders out there who specialize in loan programs which offer renovation or construction funds, in addition to the acquisition. Generally, in my experience, such a loan will be be based on ARV, maximum loan amount for example can be no more than 70% of ARV. The initial release and funds control thereafter however are what you need to understand. I usually see a maximum initial release of 90% of purchase with the remaining balance of the loan held, to be released on progress based reimbursement style draws (the hold back and releases are called 'funds control'). So, in your example, with a purchase price of 150,000 (and lets hypothetically say ARV is 225,000 and thus a maximum loan amount of 157,500), you'd get a net benefit of the loan, at the closing table, of 135,000. This means of course that, in order to close, you'll need to bring 15,000 + closing costs (leaving 22,500 on account, held back for renovation/construction (22,500 = 157,500 - 135,000)). After you close, take title, etc, you'll need to extend additional capital to commence renovation, i.e. phase 1. Phase 1 can be light, plans, permits, demo, etc but nonetheless expect to expense additional capital on top of the 10% + closing costs. Once you get through phase 1, you can then draw down on some predetermined portion of the 22,500 hold back, which the lender or a 3rd party escrow is holding. You then move to phase 2 and when phase 2 is complete, you can drawn down, etc, etc, etc.

@Oswaldo Torres

Never had an issue with cash-out in Texas... If you're looking for a conventional loan, I have always used Reed Hazard with CMG Mortgage. Reed offers excellent customer service and CMG is very competitive from a rate and fee standpoint. Outside of a conventional loan, private lenders now offer really competitive rental/DSCR loans too. So, while a conventional loan will today offer the best rate and highest LTV, for a little higher on the rate, and a little lower on the LTV, you can always exit the hard money loan with a private money rental/DSCR loan.

In what city in Texas are you working?

@Martin Yanez Jr.

I always use Alamo Title and Roxanne Mendoza; very investor friendly and helpful.  Happy to make a warm introduction if that would be of assistance.  Good Luck!

@Alex Prescott

In my experience, you can find a hard money lender when you lack experience but you should expect the terms to be less favorable (meaning you should expect/need more cash than if had prior experience). Perhaps not necessarily a higher interest rate or higher points but instead, more cash in the deal and thus a lower LTV and thus a lower risk to the lender. For example, if the usual hard money structure is 90% of acquisition and 100% of rehab so long as the total loan amount is less than 70% of ARV, then I would expect, due to lack of experience, that you'd be looking at 85% of acquisition (as opposed to 90%). Much of this will depend too on where you are located (if not local to the flip), the geographic location where you intend to flip and the associated price point in that geographic location. Further, unless you are buying at a price point under 75,000, or the rehab is minimal, you don't have much room to work with if you 20,000. See numbers below...

75,000 acquisition, 20,000 rehab and 135,000 ARV.

With ARV at 135,000 at a maximum loan of 70%, you can borrow up to 101,250 which means, in this scenario, you could get the 85% of acquisition and 100% of rehab, i.e. total loan amount of 83,750 with an initial release at close of escrow at 63,750 which is 85% of acquisition, and, the rehab holdback of 20,000.

15% of the 75,000 acquisition down is 11,250 and closing costs are likely ~3,000 so you initially need ~15,000 to close

After close, a prudent hard money lender will require reimbursement style draws which means you must first complete at least phase one of improvement/rehab to the property before drawing down on the rehab hold of 20,000.

With only ~5,000 left over after close, you don't have much room for soft costs like utilities, nor much room to get the rehab started, nor much room for the monthly debt.

@Trevor F.

Plenty of lenders out there who offer DSCR/long-term loans to help you borrower against these types of assets with lower loan amounts so you don't have to use the conventional/conforming spots. Do you own these in an LLC or some type of entity? What City in North Carolina?

@Daniel Hendrix

Plenty of good hard money lenders out there who are quite familiar with San Antonio.

When you say small multi-family, what kind of property are you talking about?

@Sophia Wang

I have heard of a lender or two who would consider a non-recourse loan for new construction. Non-recourse is hard enough to find, let alone new construction so you'll basically need to find a private, nearly private, party to fund such a loan. Expect the fees and interest rate to be higher, expect the LTV to be lower and likely you'll be paying interest on the full amount of the loan from day 1.

I agree with Dmitriy however that UBIT is in play regardless of whether or not there is a recorded lien or an equity partner.

@Zachary Tarbill

KCMO is a hot bed for private, collateral or asset based money, tons of flippers, tons of turnkey firms and no lack of capital to finance.  How have you searched out lenders thus far?

Absolutely, I have the best contractor in the business, local, honest, hard working and at a great price too.  Mike Womack, Womack General Services.  WGS handles all of my renovation projects in Clarksville and Oak Grove.

@Jonathan Norris

I have purchase many homes from auction.com and the associated foreclosure sales.

First, there are a couple of different auction types that take place on Auction.com, Bank Owned (REO), Foreclosure Sale (Trustee/Sheriff Sale), etc.

If the auction is for a Bank Owned property, i.e. not an actual Foreclosure Sale (Trustee/Sheriff Sale) then using a loan to finance the purchase is no problem (auction.com and the bank/seller take way more than 30 days to close these types of transactions).  In this case, however, you still won't be able to get an appraisal because you still aren't 'legally' able to access the property during the escrow...further, the prior homeowner or tenant may still be occupying the property and in this case they can be very adverse, require legal eviction, etc.  

If the auction, on the other hand, is a Foreclosure Sale (Trustee/Sheriff Sale) then using a secured, non-JV type loan (which requires title insurance and a recorded lien) to finance the purchase is not possible.  Foreclosure Sale auctions, whether live or online, require cash money, generally very quickly (often the same or following day).  With this in mind, no lender, other than a JV type, equity/money partner is willing to risk putting up the cash when you haven't probably seen the house, don't have the ability to get title insurance, record a lien, etc.  In this case, the only way to purchase at an Foreclosure Sale (Trustee/Sheriff Sale) is with your own cash or a JV type equity/money partner.  Once the Foreclosure Sale (Trustee/Sheriff Sale) purchase closes (and you get the deed recorded) you can then pull hard money to get your cash, or your JV type equity/money partner cash back via refinance.

Second, if the lender needs 30 days and an appraisal, you need to find a new hard money lender...

Good Luck!