Potential Partners or Hard Money?

Question

I am slowly getting back on the REI train. It's been about a year or so and I have been weighing all possible options. I would love to partner with investors in other markets on flips if possible just to build a little more cash. I am in Los Angeles, but looking at other markets with lower entry points. I love Detroit, but I am open to different markets as well.

Worst case is if I do it myself, I may go with Hard Money lenders for my first few deals. I know it can be more expensive, and I am ok with that. What are your thoughts and experience with hard money lenders? Are there any particular ones you'd recommend?

Cameron Tope · Answer

@Dorian Jones I believe BiggerPockets has a list of preferred hard money lenders? If not go to a local meetup or ask a real estate friend that you trust, who they use.

I used hard money for my very first deal and one other deal, then built a relationship with a private money lender. The private money lender had better rates and overall better to work with. BUT you really have to trust the private money lender, as if they don't bring money to closing then you can get into a pinch.

It's harder for a hard money company to be shady and easier for a private money individual.

Best of luck!

Odie Ayaga · Answer

Do you have a partner like you described in place in Detroit?

Evan Polaski · Answer

@Dorian Jones  I have used hard money lenders for a couple flips.  One worked out great (largest dollar amount we made on a deal), and one we lost money, almost to the dollar of the interest expense we paid to the lender.

In my limited experience, there are some online crowd funded lenders.  Definitely more hoops to jump through to get draws.  The second was a regional HML.  Much easier to work with (we just got aggressive for a deal and learned our lesson)

Fees and interest rates between the two were near identical.

As mentioned if going this route, just be you are overly conservative on rehab, resale, and timeline.  We got hit with all three (rehab over, resale lower, and timeline almost 4 months longer) and it cost us.

Odie Ayaga · Answer

@Dorian Jones are you thinking of flipping in Detroit? What's your price point? A lot of Detroit properties can come with loan sizes that are too small for any lender.

Courtney Rollins · Answer

Hey Dorian, as long as I am conservative with my numbers and holding cost, I've had good experience with hard money. I like working with local folks due to the personal touch.  Good luck!

Dorian Jones · Answer

@Odie Ayaga

Nothing in concrete. I have had conversations with a few people.

Dorian Jones · Answer

@Evan Polaski

Thank you. So it really comes down to making sure you have a really great deal? Good to know. I need properties well below market value.

Dorian Jones · Answer

@Odie Ayaga

If I were to flip out of state I’d like to join someone who’s already active in the market and has systems in place that I can learn from.

I’d consider small multi family properties in markets with lower entry points.

Dorian Jones · Answer

@Cameron Tope

Thank you. I’ll definitely keep that in mind.

Dorian Jones · Answer

@Courtney Rollins

Thank you. When working with local banks, are they looking for people who are natives from the state or it doesn’t matter as long as the deal makes sense?

Potential Partners or Hard Money?

Most Popular Reply