All Forum Posts by: Doug Smith

That is an amazing deal for hard, private, or bridge funding. Of course, I would need to know a lot more to tell you truthfully, but on average, that would be a pretty great deal. 

 Kiavi does a good job with a lot of things, but they tend to be a bit more "vanilla" and stick to their guidelines/checklists. We've not brokered anything through them in a very long time...not to say we wouldn't, but we formed closer capital partner relationships over time. By your description of the situation, I thought that might be in. 

I know exactly what is happening with the push-back you're getting. Basically, the money used in this type of financing comes from "Wall Street". I remember when Lending Home, now Kiavi started, there really wasn't anyone other than banks and private individuals that would finance a new build...and those were hard to find. The people that run these companies usually come from an "investment banking", real estate, or construction background. Many don't come from traditional lending sources. The institutional firms that do this type of lending (we deal with them every day) have to "securitize" the loans...meaning have their hedge fund/Wall Street backer bless the deal. These people often don't understand lending and have a checklist of boxes to check. Having an experienced GC build their first deal or two of their own is, for reasons that sometimes don't make sense, get push-back. We do them, but like you we often get push-back from the capital-provider funds. It's stupid, but we have to navigate it. I'm glad you shared this.

It will be hard with a more institutional lender like us to get down below $100K on a loan amount. Our cost to do business vs the revenue a small loan generates would put us in the red. You're likely best to fund that wish someone local...perhaps someone you know...that is looking to put $40K-$50K to work. I would stick with individuals at those lower price points. 

I think that's entirely up to you and your math. I am sure you're aware of the FEMA 50% Rule for renovations of properties in certain Flood Zone's, so I won't insult your intelligence by going into it. I've learned over the years that real estate investment is simply a math problem. Either the numbers work or they don't. I was at a CCIM luncheon recently and some of my lender buddies and I were discussing that many of their banks are getting out of multi-family because of rising costs to manage the properties...including taxes and insurance. I think the same would apply here. I live in Tampa, FL and we just got hit hard with Hurricane's Helene and Milton...Hurricane Sara is lurking out there. Insurance rates stand to rise dramatically, so the question is "will the insurance rates go up enough see rentals go into negative cash-flow situations?" It's certainly something you should consider, but at the end of the day, it's a just a math problem.

We do them, but they aren't cheap and your LTV will be lower that a HELOC on a primary residence. Banks aren't really in the business of lending to real estate investors anyway...they focus primarily on "operating entities", but they can be done. They will, however, be above the rates your posting. There's a significant risk premium for investor 2nds.

I had good friends/business contacts that worked there...all have fled to greener pastures. We've grabbed drinks a few times and it's sad. Lenders are really dependent upon larger funds to fund them. When one fund gets in trouble, it trickles down. It's really too bad. A rising tide raises all ships. As a lender, I hate seeing it. 

Hi All, 

I know I haven't been on here for a while, but I've honestly been too busy to log on and interact. I'm a Tampa-based lender as well as an investor. That being said, I'm getting a lot of inquiries from unseasoned investors about the "flood" (pun intended) of new opportunities on Florida's West Coast. Early in my career, this really bit me in the tush and I am seeing many investors walking right into the same trap. If you don't know about the FEMA 50% Rule, please look into before you buy and try to rehab a home in a flood zone. Google is your friend.

The FEMA 50% Rule is a little-known rule that limits rehab budgets on homes in a flood zone to only 50% of the value of the STRUCTURE. In Hillsborough County, FL (Tampa), the structure value is deemed to be the Tax Assessed Value with the County Property Appraiser. The value of the dirt is NOT included in the calculation. In other words, let's say you buy a property where the total value is $200,000 and, of that, the structure value is $80,000 and the dirt is $120K, then you are only allowed to rehab the property for no more than $40,000 (50% of the $80K). Otherwise, you have to tear it all down and build a new home to current codes and elevations. That is overly-simplified and there are other rules and exceptions to that, but it's something that newer investors need to be aware of before you start chasing "flooded homes" for rehab.

In the aftermaths of Hurricanes Helene and Milton, I've gotten tons of inquiries for these types of homes. I simply thought putting it out there in the Forum might keep someone from unknowingly buying something that might leave you out to dry. Happy Investing Everybody!!!

Hi Elizabeth! Say hi to my peeps Jeremy Palmer and Brittney Tuck over there.