All Forum Posts by: Steven Goldman

Hi Adam, a multiple advance loan is a loan were the borrower has an authorized total principal amount but can draw money from the available balance as needed. Most fix and flip lenders will charge interest for the entire mortgage amount even the portion which is being reserved for the rehab. So you start paying on the total loan amount immediately after settlement. A multiple advance loan allows you to only pay interest on the amount you have drawn to date. Many commercial business lenders will allow you to make multiple advance loan. On larger projects this is a very important and essential feature. I hope that helps. Good luck.

The most important part of the repeat is the refinance. In order to get all or most pf your initial investment back you must carefully select the target property and calculate all of the expenses associated with the rehab. That includes any interest you pay on the bridge loan during construction. Their are also other less obvious expenses such as the costs of the utilities, permits and other construction related expenses. So BRRR works! I is all in the acquisition price of the target property. The management of the construction costs, and bringing the project in quickly, at projected cost.

I suggest you speak with a lender discuss your projected ARV and make sure that the cash out refinance is going to get your cash out or more, based on your original investment. Good luck.

Nicole Allen I am not sure that their is a actual definition of the difference. Here is how I see it. Hard money loans were always associated with bridge lending. Short term high interest and upfront costs. What is now called fix and flip lending for construction is a hard money loan by the old definition. see

https://www.investopedia.com › ... › Real Estate Investing A hard money loan is a type of loan that is secured by real property. Hard money loans are considered loans of "last resort" or short-term bridge loans.

However, an entire industry of lenders has grown in the last ten years. National funding companies, many of them backed by hedge funds, started offering thirty year fixed loans at higher interest rates with greater money down. Prior to 2008 they would be known as sub prime loans and today they are called Non QM loans. (Sub prime referred to the status of the borrower. not a prime borrower) These loans are bundled together and sold as securities to investors. The Non-QM market place often has prime borrowers who are utilizing Non QM lenders for speed of execution and the more relaxed underwriting.

The term hard money has grown to encompass both short term bridge lending an these funding company loans which are permanent fixed term loans. It's catchy, but it is also amorphous. 

see: private lending. noun [ U ] FINANCE. lending by a person or an organization to people who are having difficulty getting loans, usually at a higher rate of interest than a bank would charge : a private lending agency/company. May 4, 2022

Private lending is generally between individuals or private commercial lenders. (Family offices) So when you know an investor who will joint venture with you for interest on their money, that is a private lender. When the crowd together that is crowd funding. Although a industry has grown where companies are formed that aggregate individual investors to fund loans. 

So the difference between private money and hard money is private money is individual to individual or LLC to LLC. Hard money Lenders describe the Non-QM lenders both bridge and permanent.

I believe you should build a team of real estate professionals who can aid you in every phase of your business. A good mortgage broker knows the entire marketplace where you will qualify and the best rates. The private lenders and funding companies all have niches. Some concentrate on refinancing, some are fix and flip lenders. The lenders even have restrictions on asset classes or, construction types. (Mixed use yes, office space no) Having a resource so that you have confidence that your project is being placed with the right lender is important. One lender will approve a project that another will not. Good luck. 

It has been our experience that log homes are hard to finance. We know a few companies that will entertain them. I am not sure what the appraisal rules are regarding value adjustments on log homes. You might want to find a log home builder and ask them who is writing loans on log home properties. Good luck. 

Find a mortgage broker who can obtain the AIRDNA statistics for a property you are interested in. Your projections are only so important what numbers will a lender use? Maintaining AIRDNA access is expensive. Good luck.

Quote from @Cole Simpson:

It's hard to say exactly what the future will be like, but it seems likely that short-term rentals could become more popular in the years ahead. This would mean an increase in available units and lower prices for those who rent them out! How do you think the market for short-term rentals will change in the future??

Over the last several years STR products are slowly being accepted in the Non QM space. Banks are reluctant to finance STRs and treat them as a hospitality loan. That makes it more difficult. The reason that STR financing has slowly increased is Non QM lenders have become more comfortable with the risks associated with potential zoning amendments.  Of course banks are not so comfortable.  

So to answer your question with a question: What is your risk tolerance? You can obtain financing. So are you comfortable with some risk or do you need a sure thing? One wat to reduce your risk is to check with the zoning office for the target location adn see wha the climate is in the Community. 

Personally, I believe the STR share of the hospitality market is only going to increase due to the after effects of Covid and,the need for young families to be able to travel and stay as a unit. Also, have you seen the restaurant prices these days, having a full kitchen if you have a young family, is a big deal.(Your own bedroom is also nice!)

Once you have mastered the STR business the returns are significantly greater than long term rentals.  STR is not your bag, if you want to manage your properties as passive income. Running a STR is similar to a hotel. You must manage reservations, cleaning, damages, complaints, parties and so forth. Even if you have a property management company in place it still requires your time and attention to create a healthy return. Also to insure that you do not get bad reviews on the various platforms.

If you decide to be in the STR business you will need to know about available financing. All commercial property lending is based in part on, debt service coverage. STRs have significantly greater income than long term rentals. You need the lender to base the maximum loan size on the actual or, projected STR income. Their are two methods lenders use to determine income to calculate  debt service coverage for a STR. First, if the property is an existing STR the underwriter will base the DSCR on the actual established income. Second, for a newly created STR the lender calculates D.S.C.R. by using projections from firms such as AIRDNA. 

Interest rates on Loans on declared STRs are slightly higher than LTRs. You have fewer options to find financing for a STR. So if you are considering purchasing a property, and creating a new STR, you need to consult with you mortgage lender or broker. Make sure that the income or, projected income, will support the loan amount that you will require. Generally, 75-80 percent is the maximum LTV available on STR financing. Assemble your team before you start prospecting Good luck.

I agree with Michael Dumler every lead is an opportunity. So always reply. Maybe it is a short sale or a loan modification and you can refer it for credit later. 

Quote from @Robert DiPisa:

Hello, my name is Rob and just opened an LLC to start investing in rental properties. I am local to Philadelphia and was looking for advise. I have some capital but not much, meaning I have enough money for a FHA loan down payment but not 25%. From what I've been reading, since the LLC is new, it would be difficult to receive an FHA loan without any business credit or portfolio. Does anyone have advise as to a lender or another option that would help get my business started.

Hi Rob, you are correct that FHA will not loan to an LLC. If you want to use their services you will have to do it in your personal name. On the other hand if you want to buy a rental property and you do not have the 20 percent down you can joint venture with a investor who does not want to find a deal or work the deal just wants to invest money. Typically hard money lenders will allow a JV partner and so long as your credit is reasonable, you can guaranty the loan. My advice to all new investors is to find a deal, than find the money. It is harder to find a deal than to find the money. Trust me. Thanks

@Melanie Rodriguez Their are numerous lenders who will make loans on STR based on AirDNA statistics. You will need at least 20 percent down. You should start by either looking for a rental and try to arbitrage the rental, only if the lease permits it. If not, than you need to find a joint venture partner who has the down payment and closing costs but,does not have the know how. You would be surprised how many people that describes. I applaud your courage but your need to do a rental arbitrage, seller financing (which is really hard to do in on demand areas) or, a JV partner. Good luck!

I would begin analyzing this deal as follows. Are you helping your cousin or trying to make money? I hope the answer is trying to make money. What is the scope and cost of the rehab.? If the rehab is extensive and the ARV is 700 you are playing with a thin margin considering the investment you will need to make. I What do you want to make and are your comfortable that your cousin will make enough money to pay you back with interest? How are you going to secure your stake? You need to answer those questions to see if the deal makes sense. Are you investing in the deal or lending your cousin a bridge loan? Good luck!