Flip Newbies in Maine- first hard money lender experience?

Question

To all those who have completed a flip with hard money (especially in Maine but also elsewhere):

I want to hear your stories. I'm curious as to how your first flip was financed and how the experience was, especially if you used a hard money lender. How did you structure the offer? What was your EMD and did you have a financing contingency?

I was told by my potential HML Lincoln Capital that the loan must be signified in the contract as "private money" and put NA in the financing fields. This was a result of my realtor and me requesting the maximum number of points that could be issued to include a financing contingency on the P&S. They will not disclose any maximum amount of points, only stating "the fees depend on the risk level, the amount of the loan, and the length of the loan." Isn't it still possible to have a financing contingency if using hard money?

I was also told that it takes up to 30 days to close to allow for an appraisal and title work. Doesn't this completely disagree with the whole mantra of "we buy houses cash fast?" I'd be curious to know the loan terms and experiences of people out there. Also, how did you finance the remainder of the cost?

Cheers,

Jessie

Amy A. · Answer

Look up Todd Settle.  I think he's on linked in.  He's a hard money lender.  There is also Milk Street Capitol in Portlland.  Also, if it's a good enough deal I would buy the contract from you.

John Webster · Answer

i have only used hard money lenders and got some friends hooked up with my lenders. I have never had a loan take anywhere close to 30 days longest was 10days. Fastest was 7. As far as appraisals a couple were able to do that next business day. Some deals I received from wholesalers already had title in place from attorney, I paid 400 to complete deal, that was covered from lender. Recently I just got a lender that closes most of their loans in 3 to 5 days. One I use only lends in 5 states for now but cn close same day with clear title they dnt even require an appraisal. My friend just closed his first two deals in 6 days.

Nghi Le · Answer

I can give you my perspective as both a flipper and hard money broker.  I've flipped in a few states, and I've never used a financing contingency.  Typically the inspection contingency is all you need as a flipper to protect yourself and then you'd forego the other stuff in order to make a competitive offer.  A lot of things really depend on how competitive the market is, including EMD.  I'd defer to your local realtor's advice here.

Do you have a general idea of your hard money terms?  I'd imagine you can put that in the fields.  You should try to get pre-approved with the HML before making the offer, that way you know the terms and have confidence that you'll be able to get a loan from them.

As far as closing speed, it depends with the HML.  I've had local ones close in 1-3 days, whereas national HMLs tend to take about a couple of weeks.  Maybe 1 week if you've already done a deal with them.  It often depends how fast they can get the appraisal and documents from you.

When you say, "finance the remainder of the cost", are you talking about down payment?  Most HMLs typically want to see skin in the game, so they want to see that money coming from you.  If you have friends and family, you can borrow money from them, but be careful how that's structured because HMLs might not like it and won't give you a loan.  Usually, partnerships are better than personal loans.

John Webster · Answer

As far as covered cost several pay all costs except carrying costs. If deal is very good. You get good agents, wholesalers you are in business. For example, got a deal from one of my agents. I got for 485k put 52k in it and sold for 825k. They funded that so fast it was crazy. you can do a lien embankment get deals for next to nothing some cases for free when you get good and just get a rehab loan, transactional fund or wholesale it. Not coming out of pocket That much. I am nt talking about tax liens.

Cody DeLong · Answer

@Jessie Creighton If you're not able to get the deal done.  If the numbers are good I'd take it off your hands.  But I'd deff reach out to the suggestions others have suggested.

Harrison Smith · Answer

@Jessie Creighton Generally, you get approved with a HML prior to going under contract and then you can come in as a "cash buyer" in effect. That is one of the benefits to HML is that you are already financed to purchase so you can make a stronger (and hopefully lower) offer that gets accepted and closed quickly. You can still use a financing contingency, but some of the HMLs don't want that because you have to disclose source and terms.

The trick with HML is that they want a first position lien on the property, which means any other debt subordinates to them which eliminates any other type of financing other than your money or family private money. In addition, they usually won't go beyond 70% LTV so you are expected to put 30% of all money into the deal, however, the 70% they lend is usually inclusive of repairs. For example, if you buy a property for $100K that needs $50K in repairs, the HML will lend 70% of the $150K ($105K) leaving you to come up with the remaining $45K. The price of the debt is extremely high and generally short term, so make sure you have room in your budget and stay on your repair timeline or that can eat you up.

I would be happy to discuss further if that would help. Good luck in finding a great deal to flip!

Flip Newbies in Maine- first hard money lender experience?

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