All Forum Posts by: Alon A.

 DONT DO IT, it why do you want to deal with any of it ?  the PM is meaningless. 

@Alon Attias

Money should never go from LLC to LLC

Money should go from LLC 1 to you and then to LLC 2 (note not an accountant but this is what they have advised me)

When you pull money from one it’s an equity draw and into the other ;contribution)

Why do you need so many LLC's ?

@Alon Attias

You are missing a huge point that this is money you borrowed.

If someone gives you $70k and you spent $30k on renovation you still have $40k cash that you can use to pay back to the hard money lender so when you refinance you owe less…

@Alon Attias

Let’s say it’s $270k and remodel costs $100k you now have $370k in debt and house sells for $400k. You make $30k

What it remodel only costs $70k? You now have $340k in costs and when you sell you make $60k

The less something costs you the more you can make when you sell it

Lender will fund up to an amount and you are paying interest on it- whether you spend it all or not he gets paid the same but it’s in your interest not to spend it all and be under budget

Good morning: Most rehab lenders charge interest on the entire loan regardless of whether you use the construction hold back or not. The lender finances 100 percent of the construction costs because the entire business model is dependent on your achieving your ARV so that you can exit the bridge loan and refinance or sell the property for a profit. The profit or refinance is your exit strategy that permits you to pay them back, since the entire loan exceeds the present value of the property. So you make less money then working out of your pocket because you are paying interest on the construction hold back from the time you draw the money. Some private lenders will lend you 100 percent of the purchase price and rehab. costs. You only have to contribute closing costs. Those lenders usually charge interest from the day of settlement on all of the money and many do not hold back the renovation funds. (Very risky which is why they charge higher interest rates and often more points.)

The  lender funds 100 percent of construction cost to inure that you will have adequate funds to put into the property. You often exceed that number because the lender can not plan for all hidden contingencies and change orders. Its just a underwriting formula that they have created which fits into their credit risk policy. (Credit risk is the potential for the borrower to default) I hope that helps you see the big picture from the lenders perspective.

A lot to unpack here that can't all be explained in a forum. But for starters, remember lender makes money on interest. And the more money they lend, the more interest they make. Also remember that if you spend more on repairs... you make less money. And that's the point of doing the deal.

Okay, to understand the loan interest, you add the origination fee to the interest only fee to get a total interest rate for the year. In this caes, it's 16.99% (basically 17%).

So, when you hear back from the other two lenders I am sure you are going to contact, you may find a 1% origination and 10% interest for 11% interest for example.

So, if you borrow $315,000
in scenario one you have an origination fee of  $9,450 and a monthly of $3,832 times 12 months equals $45,984 + origination fee of $9,450 = $55,434 cost for the year
in scenario two you have an origination fee of $3,150 and a monthly of $2,864 times 12 months equals $34,368 + origination fee of $3,150 = $37,518 cost for the year

That is how you compare loans regarding fees. In these cases scenario 1 is $17,916 more expensive than scenario 2