All Forum Posts by: Ariel Salvaro

Barry, my pleasure, happy to help! 

We do the same thing you do - dose out the rehab funds from escrow in stages as needed, and defer loan payments for the initial term of the loan. And we provide up to 100% financing, so we do sometimes see the same zero-skin-in-the-game investor that you do. As far as minimizing the risk associated with that goes, we do a soft credit check just to see the borrower's history of borrowing. 

Regarding the split, like I said, in the case of bird-doggers, whether they just find the property, or also do all of the work on them like in your case, they would not have been able to do the deal at all without you - assuming there's no HML competition they could go to for loans in your area. So I would say it depends on the HML competition in your area, and beyond that, on what you and the borrower agree upon. Personally, anything between 10-50% cut seems reasonable, depending on the case at hand. Maybe in case of hard-working borrowers who do all the work your cut can be closer to 10-30%, to compensate them for all the finding, working, and re-selling? That way, you get 1/4 for providing funding, they get 3/4 for doing the other three things (finding, rehabbing, re-selling)? Again, just thinking out loud here, that might be a good rule of thumb... And in any case, you will still get interest payments, on top of that 1/4 from sale!

Just thinking out loud here, I think there are 2 scenarios: 

1) If your borrower would not have enough funds to close the loan without a partner, but brings forth an attractive property, you could come in on the deal as that partner, without having to cut down interest rates - you could just have the borrower pay their fair share of the payments (whether those are deferred, or not). 

2) If your borrower has enough funds to close the loan with you on their own equity, there would probably need to be a reduction in the interest rates, and/or more flexibility on deferred interest payments in order to get in on that deal as an investor, on top of being their HML.

I know I am speaking in very general terms, so I hope this is at least somewhat helpful at least as you think about the option! 

Hi @Sanjay Gupta, have you tried getting in touch with lenders from BiggerPockets' HML database for California? Here it is:

https://www.biggerpockets.com/hardmoneylenders/california

Josue, have you tried shopping around the HML database from BiggerPockets?

https://www.biggerpockets.com/hardmoneylenders/massachusetts

Sean, did you manage to make it work in the end? 

Usually, it takes anywhere from 48 hours to 10 days to draw documents & fund the deal, and the HML usually can not draw docs or fund they we have all the required details from the borrower such as verification of down payment (if required), copies of company papers if purchasing in a company name, as well as a title commitment, closing protection letter, wiring instructions, and evidence of vacant dwelling insurance.

Hi Cesar, 

@Paul Khazansky nicely summarized it - you need to find a really good (undervalued) property deal, or bring significant cash of your own to the deal. 

In your situation, it sounds like it may be best to focus on finding a really good deal to flip, and at the same time start saving up, and building your credit score in other ways (even small typical ways like using your credit card for everyday purchases, getting paid by your employer through direct deposit instead of checks, etc.). 

There are a lot of resources here on BP how to identify undervalued properties. 

I will say from an HML perspective, just keep in mind that lenders are generally more conservative than investors - e.g. while investors think a house is undervalued because there are 3 comps that are significantly higher than your house, the lender will usually consider a house undervalued only if it is significantly lower than the worst 3 comps in that area.

Sonya, most HMLs require monthly payments, but not all do - e.g. we do not require monthly payments for the initial term of the loan, and we do loan in Texas too. So I would suggest checking out BiggerPockets' HML database for Texas here:

https://www.biggerpockets.com/hardmoneylenders/texas

You can reach out directly to all HMLs, and see your options first-hand! 

It's good that you are looking to network with hard money lenders, because as some other people above mention, it gets harder to qualify for new mortgages after the 4th one. For hard money lenders the most important factor is if you have found a good deal to flip. So I would suggest looking up HML members on BiggerPockets' database for Florida, and reaching out to all of them to start networking! We don't operate in Florida yet, but I am happy to connect too, for advice, and to see where your story takes you.

Hi Gary, 

How much shopping around have you done on this? Depending on your credit score, equity you bring in, type of repairs you plan to do, etc., you may be able to find a better deal. 

For some lenders, it is important what you plan to do with the property - I think it may be harder to find an HML for a buy and hold property that you plan to rent out, than for a fix and flip property that you plan to sell within 6-12 months, because in the former case repayment takes longer and costs you (and ultimately the lender) more.

@Aaron Gordy, I love Dallas, so you got yourself a deal! And happy to see fellow economists are making people more quant oriented. 

Under gap financing, our team usually means smaller funding for unexpected costs that happen during fix & flips, or wholesale deals, or sometimes smaller funding that may help our clients close the deal's financial construction. We work with another long term business partner for all our clients' gap financing needs - they give up to 150k in loans for this purpose, and their interest rates depend on the clients' credit score (whereas our loans depend mostly just on the property). And I know our client education materials sometimes in some States count as education necessary for them to get gap financing.