All Forum Posts by: Stanley Yeldell

Hey Sabian,

Using hard money can be a powerful way to scale faster, but it comes with higher costs and risks. Here’s a quick breakdown:

Pros of Using Hard Money to Grow Quickly:

Speed: Quick funding (often within 1-2 weeks) compared to traditional loans.

Leverage: Allows you to take on more projects simultaneously, maximizing ROI.

Flexibility: Less stringent qualifications compared to conventional loans.

New Builds: Yes, some hard money lenders fund new construction, but terms and interest rates may vary.

Cons of Hard Money:

High Costs: Interest rates typically range from 10-15% or higher.

Short Terms: Loan terms are usually 6-12 months, sometimes up to 24 months.

Risk of Overleveraging: If the project doesn’t go as planned, you’re still on the hook for high monthly payments.

Recommendations for Wisconsin:

Look for local lenders with experience in funding new construction.

Consider reaching out to regional real estate investment associations (REIAs) for vetted lenders.

Research national lenders like LendingOne, Kiavi, Lima One, and Cogo Capital, which all fund new construction projects.

 Tips for Success:

Run Your Numbers Thoroughly: Ensure the ARV (After Repair Value) justifies the loan costs.

Have an Exit Strategy: Plan to refinance, sell, or use rental income to cover the hard money loan.

Build a Strong Team: General contractors and experienced project managers can keep projects on time and budget.

Would you like some introductions to hard money lenders specializing in new builds? Or are you more interested in understanding how to structure these deals for maximum ROI?

Hey Garrett,

This is a really interesting structure, and you’re asking the right questions. Here are a few things to consider:

Structure of the Deal:

The $300k down, $4,500/month lease structure can be a viable way to secure control of the property without immediate financing. However, since those lease payments don't apply to the principal, it’s essentially a deferred balloon payment structure. It’s critical to ensure you have a clear exit strategy before the 3-year term ends.

Commercial Lending Considerations:

When you're ready to obtain a commercial loan, lenders will primarily look at the property's income potential (Debt Service Coverage Ratio - DSCR) rather than personal income. They typically want to see at least a 1.2x-1.5x DSCR.

Yes, you may need to put down an additional 20-30% at that time. However, if the property value has appreciated and you’ve established solid income streams (like the pumpkin patch and STRs), that equity could potentially cover some of that down payment requirement.

The lack of direct commercial experience may pose a challenge with traditional lenders. Partnering with a more experienced operator or bringing in a guarantor with a strong commercial track record could strengthen your application.

Additional Considerations:

Explore creative financing options like seller financing for the remaining $1.45M if they’re open to it.

Consider structuring the partnership with clear roles and financial responsibilities, especially regarding funding the $300k down payment and ongoing improvements.

Have you considered bridge financing or a line of credit to help cover initial operating costs or unforeseen expenses during the lease period?

Would you like me to draft some potential questions for a commercial lender or broker to help you gain more clarity?

Hey Jennifer,

I’d love to hear more about the types of funding options you’re offering. Are you primarily focused on fix and flip, rental loans, or something else? Also, are there specific markets or property types you’re more inclined to fund?

Looking forward to learning more!

Hi Amanda,

This kind of dual-income, nonconforming property can definitely be tricky to finance through traditional channels because of appraisal and zoning challenges, but there are some creative options you might explore:

Seller Financing or Owner Carry: Offering seller financing can attract buyers who are comfortable with nontraditional deals and might avoid bank hassles. You could structure it as a land contract or wraparound mortgage.

Private Money Lenders: Many private lenders and hard money lenders are more flexible on zoning/appraisal issues, especially if the property cash flows well and is in a strong rental market.

Partner with a Real Estate Fund or Group: Some local or regional investor groups and funds might be interested in buying such an asset off-market, especially if it provides steady income and appreciation potential.

Use Niche Investor Networks: Besides Facebook groups, look at platforms like BiggerPockets marketplace, Connected Investors, or local real estate meetups where investors share off-market deals.

Create a Buyer’s List: You can start building a list by networking with wholesalers, brokers, and agents who specialize in creative financing and off-market deals in your area.

For privacy, you might want to use confidential buyer letters or require NDAs before sharing detailed info.

If you want, I can help connect you with some private lenders or investors who specialize in these types of creative deals in Michigan.

Good luck! This sounds like a strong opportunity.

Hi Brenden,

A 9.8% interest rate on a home equity loan is definitely on the higher side compared to traditional HELOCs or home equity loans, which often range from about 6% to 8% for borrowers with strong credit. But rates can vary widely depending on credit score, loan-to-value ratio, and the lender.

Whether it “beats” selling equity depends on your goals. Taking a loan means you keep ownership and potential appreciation, but you’ll have monthly payments and interest costs. Selling equity (like a cash-out sale or equity partner) avoids monthly payments but means giving up part of your upside.

If your primary goal is to build rental portfolio cash flow, consider:

Shopping around with banks, credit unions, and private lenders for better rates.

Exploring alternative financing like DSCR loans or portfolio loans, which might offer better terms if the rental cash flow is strong.

Weighing the tax benefits of mortgage interest deductions against the cost of the loan.

If you want, I can help connect you with lenders who might offer more competitive rates for your situation.

Hope this helps!

Hi Emily, finding a good attorney familiar with seller financing can definitely be a challenge. Here are a few tips that might help:

Look for Real Estate Attorneys Specializing in Creative Finance: Try searching specifically for attorneys who mention seller financing, creative real estate deals, or contract law on their websites or profiles.

Local Real Estate Investor Groups: Sometimes local REI clubs or meetups have attorney recommendations. They often have relationships with lawyers who understand these niche deals.

Online Platforms: Websites like Avvo, LegalMatch, or even LinkedIn can help you find attorneys with experience in seller financing and client reviews.

Referrals: Ask other investors or lenders you know—personal referrals often lead to attorneys who are responsive and knowledgeable.

If you want, I can share contacts of a couple of attorneys I’ve worked with who handle seller financing contracts. Just let me know!

Hey Kwanza, great questions.

DSCR Loans and Closing in a Trust:

DSCR loans aren't the only way to close in a trust, but they are a popular option for investors since they focus on the property's income rather than the borrower's personal income.

Some conventional lenders and portfolio lenders may also allow closings in a trust, but terms and requirements will vary. Always verify with the specific lender upfront.

Restrictions on Property Use:

With DSCR loans, the property is typically expected to remain income-generating (e.g., rental, STR).

If you plan to convert it to personal use or rent to a family member, check your loan agreement for occupancy clauses or seasoning requirements.

Also, some lenders have specific provisions regarding owner-occupied vs. non-owner-occupied properties, especially if the loan terms were based on rental income.

Would you like some insight into how to navigate potential lender restrictions when considering future property use changes?

Hey Consuela, great questions and solid breakdown of the situation. Here are some insights:

Is this a good candidate for a Subject To deal?

Potentially, yes. The key here is the 7% interest rate — it’s not super low, but it could work if the cash flow numbers line up.

You’ll want to calculate the projected rental income vs. the mortgage payment + any other holding costs to see if the property will cash flow as-is.

Consider if the $60k-$70k rehab can be financed through private money, as you mentioned, or structured as a separate note.

Documentation to Verify Feasibility:

Mortgage Statement (to verify remaining balance, interest rate, and monthly payment).

Payoff Letter (to confirm exact payoff amount and any prepayment penalties).

HOA Information (if applicable).

Property Tax Status (are there any delinquencies or liens?).

Insurance Info (will the current policy transfer or need updating?).

Additional Information to Collect:

Market Rent Analysis: What are similar units renting for? Can you cash flow after accounting for mortgage, insurance, taxes, and any repairs?

Seller’s Motivation: Are they behind on payments? Facing foreclosure? Understanding the urgency can open up more negotiating leverage.

Condition Assessment: Is that $60k-$70k rehab accurate, or could there be more hidden costs?

Partnering vs. Wholesaling:

You could wholesale it to a creative finance investor who specializes in SubTo deals, but if you’re looking to gain experience and keep some cash flow, consider structuring it as a joint venture with the experienced flipper.

They could handle the rehab while you handle acquisition and SubTo structuring, splitting equity or cash flow based on contributions.

Would you like any more details on structuring a SubTo agreement or partnering on a deal like this?

Hey Tom, good question. Yes, there are specific financing options for rural properties that may not fit traditional hard money lender criteria. Here are some options:

USDA Loans:

The USDA offers loans for properties in rural areas with favorable terms and low interest rates. They’re primarily for owner-occupied properties, but there are also options for investment properties if they’re considered essential rural housing.

Farm Credit Services:

These lenders specialize in agricultural and rural properties, offering loans for land, construction, and even farm-related infrastructure.

Local Credit Unions and Regional Banks:

Small, local lenders often have more flexibility with rural properties, especially if they’re familiar with the area and market.

Private Money/Portfolio Lenders:

Some private lenders or portfolio lenders will consider rural properties, especially if there’s strong collateral or a viable exit strategy.

Construction Loans:

If you’re looking to finish construction, a construction-to-permanent loan could be an option. It rolls into a standard mortgage once the project is complete.

Have you explored any of these yet? Or would you like some referrals to lenders who work with rural properties?

Ryan, interesting strategy, and kudos for looking to scale up. Here are some thoughts:

Go Credit Pros:

I’d definitely do some deep due diligence on them. Companies that focus on 0% interest business credit cards can be useful for short-term funding, but you need to fully understand the fees, repayment structure, and potential pitfalls if you can’t pay off the balance before the promo period ends.

Ask for references and read reviews from investors who’ve successfully used them for real estate deals.

Using Business Credit for Real Estate:

While 0% business credit cards can provide quick capital, they’re typically not intended for real estate acquisitions, and some lenders may consider it risky.

Consider how you’ll refinance or pay down the balance once the 0% period ends. If the cash flow isn’t strong or the market shifts, you could be stuck with high-interest debt.

Alternative Funding Options:

HELOCs/Second Mortgages: Since you've already used a 2nd on your primary, a HELOC might not be feasible, but it's worth exploring for future deals.

Private Money Lenders (PMLs): If you can find a strong cash-flowing deal, PMLs might be more flexible and less risky than business credit.

Gap Funding: If you can find a private lender to cover the gap between your down payment and the financing, that might be a safer play than leveraging high-interest credit.

STR Strategy:

If your existing STR is only breaking even, be cautious about taking on more leverage. Focus on optimizing your current property first to improve cash flow. That way, you're in a stronger position to acquire the next one without overextending yourself.

Want a sample funding strategy that incorporates business credit and private money? Or maybe a few more creative financing options?