All Forum Posts by: Steven Goldman

All fix and flip loans require a deposit on the purchase price. The rehab money is usually totally funded. Some younger investors use a joint venture partner to help supply the down payment. It is easier to find money than a good deal. Find the deal you will find the money. Good luck.

If you plan on borrowing the money from a Non QM lender you can not use a second mortgage. You can include them in your operating agreement with a buyout provision. Or just give them a note. No QM lenders in any market will allow a down payment equity loan. That is why they your JV is a member of the LLC or, just give a note. Good luck.

No legitimate lender will lend money on a rea estate project without a title policy. Always insist on references from a lender and check out their online presence. While some scammers exist it is the exception to the rule in banking. In todays world their are thousands of legitimate online brokers and lenders. You just need to vet them as you should any professional or service provider. Good luck.

Your questions raises its ugly head every time we enter a period of rising interest rates. Just before rates rise, values rise, signaling a maturing inflationary cycle. So, when rates rise, you have the double whammy of higher prices combined with higher interest rates. This is why the real estate market will have to shake out. Your question is how do I prosper in a market place of higher prices and higher interest rates?  (Well for now at least the rental rates have also risen.)

The current emerging market requires investors to be more savvy. Just going to the MLS and buying a property and rehabbing it will not work. You will have to look for off market properties, estate sales, foreclosures and distressed properties in order to buy at a value which will support a BRRR strategy. Th rising rate environment will wash out all of the Johnny come lately investors who always appear at the end of a long up cycle. Who isn't a real estate investor these days?

Higher rates make it harder for sellers to sell, and buyers to buy. So this will create opportunities to buy distressed properties with seller financing etc. If you learn how to negotiate the rising rate environment than the normal market will seem like kids play. If real estate is your calling than the market forces are just challenges waiting to be met! Good luck.

I suggest you speak with your mortgage broker and structure the deal to meet the lenders requirements. Without getting too specific: Some lenders will require everyone to guaranty the loan, some will not. All will require the guarantors own a threshold minimum percentage of the LLC. For a smooth ride, I strongly recommend coordinating your LLC structure with your lenders requirements. Good luck.

Quote from @Jason Kang:

@Steven Goldman Thanks for the insight on junior investors! A bit more information on what I'm trying to do - I'm trying to buy and hold (rent out) an out of state property (duplex). I don't plan on flipping at the moment or doing a BRRRR at the moment, so I don't expect to be working with any hard money lenders yet. Thanks again

The fact it is turn key does not matter. Funding companies have thirty years fixed financing so if the property can support a slightly higher interest rate than you can go with a funding company. You will have trouble finding a commercial bank that will not want to source your funds.  Either way it would be a LLC. Makes no difference if it is in or out of state and you are just holding no difference.  Good luck. 

Jason: You can obtain money from Jr. investors for the down payment. you will have to make them partial owners of your LLC. Less than 20 percent. You can then finance the purchase or purchase and rehab. Hard money lenders will not investigate the source of your funds, so long as, they are in your LLC account. You will also need six months reserve equaling the mortgage payments in a bank account or other type of account. (i.e. savings checking or 401k IRA etc.)

Many of our flippers or holders raise money from private sources for their contributions it allows them to keep moving without having to have large amounts of capital.  Jr. Investors can be found at RE meetups and also online at investor groups. Good luck. 

Susan: start with the concept that you are going to have to personally guarantee the loan. Their are a few debt service coverage lenders that will make loans under 75K. So it is a very specialized space. It is true some local banks will make smaller loans but they will usually want a 10 year term. So your rent must support the higher payment amounts. Your personal financial condition will be evaluated and you must have an acceptable Debt to income ratio and credit score.

Small loans are not that profitable so you will see that the market is limited. Good luck

Real Estate is like life: 

"Some of it's magic,
And some of it's tragic,
But I had a good life all the way"

Jimmy Buffett

What a great business!!!!!

Nadia this is a common problem. The funding companies who are private lenders will make you a debt service coverage loan based only on your credit score and the minimum debt service coverage. You will pay a higher rate becuase thi is considered a Non-Qm loan. The current range is 6.25-7.5. They will refinance using the ARV six months after your purchase. You should get an approximate refinance quote before signing a contract. That will insure you have a sufficient spread between your current value, and your after repair value to get most of your capital out. 

Because of rising rate you must create enough space between CV and ARV to make sure you can recover your money on the refinance. Good luck!