All Forum Posts by: Sarah Hatton

As others have mentioned it's an integral part of the flip process to have GC(s) walk the property before putting ANYTHING under contract. There are more sophisticated ways or running rehab numbers but here's a quick cheat: 

Major metropolitan areas (LA, New York City, Miami, etc): 

Mid grade upgrades: $50-75 per sq. ft. 

*smaller properties use high end of range* 

High end upgrades: $100 er sq. ft. 

If the property is located somewhere like the suburbs of Virginia or Illinois (just naming a few — really any mid range metropolitan area) the cost of rehab can go way down. We've seen projects done for around $35 per sq. ft. 

Hope this helps!

Normally $75k minimum with $100k minimum asset value. There's an expanded' program if you will where we can get down to $55k loan amount with $75k minimum asset value. 

Welcome to BP Kevin! You're apart of a great community. 

Hey Jacob, 

We see a lot of our investors go the conventional route until banks cut them off; you won't find better leverage or rate options in the private space. I've seen up to 10 mortgages on personal credit so I would suggest shopping around to other banks if you haven't already. Once you move to private financing many lenders will require (or heavily encourage) closing in an LLC. Whether or not you decide to do this private financing will NOT report to personal credit, however there are a handful of other reasons its a good idea to set up an LLC or trust (Side note: if you choose to set up a trust I would suggest structuring as revocable). Separately, (and personally) i'm not a huge fan of combining properties into a portfolio loan unless you plan to hold onto these properties long-term, otherwise there will be an added layer if/when you plan to sell since they will be cross collateralized — from my experience I see 125% payout to pull a property out of the portfolio.

Hey Jake, 

There are a handful of ways a HMLs can be structured. Most commonly will be "direct" lenders who use their own funds and hold loans in house. "Indirect" lenders partner with other lenders and institutions to fund their loans. Then there are lenders who do a combination of both; maybe a loan comes in that doesn't quite 'fit' the in-house guidelines (i.e FICO is too low, experience requirements, asset class, etc) but they know of another lender in the industry that would fund it and subsequently pass the loan off to them. Hope this helps! 

Hi Andrea, 

I think the biggest questions here are around your experience with rehab, liquidity situation, and time constraint. From your description it sounds like you are planning to fund the rehab from your personal income, something I would not recommend. Your capital constraints will slow the speed of your project and how quickly you can rent out the spaces and make returns. Second, projects almost always go over budget and this one seems to be no exception (water damage, holes in roof, floor, HVAC, etc). Lastly, you are going to be time constrained working a 9-5 and trying to work alongside this project. It will create stress and force you to make lifestyle sacrifices to move the project along. Personally, I would start on smaller multifamily/commercial spaces first and work your way up to bigger projects! 

Hi Monica,

You're in a great position since you purchase with cash and it sounds like you own the property free and clear. DSCR loans are asset based (DSCR = debt service coverage ratio) and have refinance options up to 75% of current value. This would be a great option to explore, and I'd be happy to be a resource for any questions.

Thanks! 

Hey Nguyen, 

You should be able to qualify for a Debt Service Coverage Ratio Loan (DSCR) as long as this is an investment property and the property is leased (typically a requirement for refis). The DSCR ratio = rent / expenses (taxes, ins, hoa, etc). As long as this equals 1.0 or is higher — and you have decent credit — you should have options available. It is worth noting TX has really high property taxes which can negatively impact the DSCR ratio.

Hey Heather, 

If you plan to use private financing for your investment ventures, most lenders make it a requirement to close in an LLC. Reason being investment lending, aka non-consumer loans, is further solidified via an LLC. Another reason is an LLC allows for a cleaner closing and title process. Here are a few reasons why creating an LLC is beneficial to the borrower:

1) Personal Credit: When closing in and LLC your investment properties will NOT be reported to personal credit bureaus . This is especially important in the worst case scenario of foreclosure.

2) More protection: most hard money loans will require a personal guarantee whether or not you close in an LLC, however this does create additional hoops the lender has to go through to pursue the borrower. It's very rare this actually happens, the lender will most likely only be interested in pursuing the asset.

3) Tax Benefits: owning real estate in entities drastically increases the amount of write offs (depreciation and such) that you can take on your income taxes. Owning property individually does that as well, but owning in an LLC multiples the ways in which you can use those write offs to your advantage.
                                                                                                  

Hey Michael, 

Just sent you a message! Would love to connect on this project and see how I can help.