All Forum Posts by: Ben Stoodley

Hi @Mel Rosario,

Yes, I would have to say that cash really is king in the real estate world, especially when the seller is entertaining offers from investors - who have a notoriously bad habit of backing out of deals (part of the process). It just reduces one of the many factors that could stop the deal from happening - mortgage contingencies. 

My suggestion would be to use Hard Money on these deals, unless you can find private investors to pool together enough money for the entire purchase. Most sellers know hard money is as good as cash. Most good HMLs will write LOIs for you to subimt with your offer to strengthen the deal as well. I've also seen a lot of RE Investors write their offers as all cash, then when it's time to remove contingencies and proceed, they let them know it's Hard Money and they just have to write an addendum to the contract.

Hopefully this helps a little!

-Ben

Hi @Felix Ricarte

As you know, most every type of loan will require some sort of money down towards the purchase of the investment home, typically 20-30% of the purchase price. Hard Money is the most expensive but the easiest for this type of loan. All HML should be asset based and will be able to close within a 3-5 days. This will prove very useful, just make sure to account for the cost of the money.

Private lenders will be a better deal for you, but they are harder to find and their capital is often limited. So if you are finding a few deals a month, I doubt most would be able to keep up with the financing. 

Just a few tips. Hope that helps.

Good luck!

Ben

Hi @Shawn Mims,

This is definitely a deal we would be interesting in pursuing further details on and certainly have the capability of financing. Why don't you email or call me with some more details and questions you might have. Contact info below.

Ben Stoodley

[email protected]

(619)777-8790

Hi @Edward Hatcher

 I'd be happy to help you! Send me some info on the Houston deal and I will get you a quote right away. I'll follow up with an email as well.

Thanks!

Ben Stoodley

[email protected]

(619)777-8790

Hi @Rod Desinord !

Welcome to the rehab business! You're in a great location to get going on this, especially with your REALTOR experience and knowledge. We have done a lot of flips there. I am a lender on the west coast (CA, NV, AZ, TX) and wanted to give you a few tips. 

• Points/Fees: there will be a few origination points, generally 2-6 points. Generally, lenders determine the points from the term and complexity of the deal
• Junk Fees: your lender should not charge junk fees, referred to as processing fees, appraisal fees, inspection fees, etc. They can amount to around $2500 on average, and are completely avoidable - your lender shouldn't charge any
• No Pre Payment Penalty: this is very important, as some flips will happen very quickly, and the borrower should not have to pay any interest on remaining months if paid off early
• DIRECT LENDER: make sure your lender is the actual check writer, not a broker that calls themselves direct OR a lender that needs to confirm acceptance with their investors. Best test for this is to see how quickly they can close, shouldn't be more than 5 days, otherwise they may not be direct and their investors may have the final call. This can lead to being left in Escrow with no financing because your lender backs out last minute. Or just ask where their money comes from!
• LONG TERM RELATIONSHIP: this could be the most important aspect, the lender truly caring about the borrower and looking out for their best interest, as lenders are essentially their financial partner in all the transactions. 

Hope this help!

-Ben Stoodley

It all depends on what you want for each project @Griffin F.  . I rarely ever see flat payments from private/hard money lenders. When I do see them, it's usually around 10% of the total loan. This is a lot of money. It all depends on how much you are borrowing vs the size of your margins/your gross profits. For most projects I've either financed or purchased, the more common annualized rate makes way more sense. Just set up an excel spreadsheet and run your numbers both ways! I would also check junk fees, as many lenders charge around $3k in unnecessary fees that you can either negotiate out or use a different lender on. Be sure there are No Prepayment penalties. Also, as was previously mentioned, building a long lasting relationship with the lender is probably the #1 tip. This will get you the furthest in the long run. Hope this helps! 

-Ben

@Justin Foley welcome to BP and the REI industry! It is a fun one with many variables but lots of opportunity.

As a lender and investor, I just wanted to say a few things to help you get started. You've seen just on this thread that the market in Vegas has certainly tightened up and deals are harder and harder to find. We finance a large percentage of our loans in the Las Vegas area, so people are still finding them! It is just about being creative. Think of new ways to get in front of the Sellers, go direct to the homeowner when you can, offer something different. This industry is FLOODED with investors trying to do the same thing and unfortunately it can put a negative feeling in Sellers minds. 

Regarding Hard Money, I think this is the perfect time to use it. I encourage all my clients to shop around. Every deal is different and every lender is different. So some deals may be better with different lenders. The obvious advantage of using hard money is that it allows you to acquire and flip more properties at once, rather than using your own money and being limited to only doing 1-2 at a time. Profit per property will be decreased due to the cost of hard money, but overall year long profit will be significantly increased due to the volume hard money financing allows for. When searching for a lender, make sure to get all the basics - interest, origination fees, junk fees, terms, etc. Make sure there is NO PPP, you should never pay a prepayment penalty. Always try to find a lender that is interested in building a relationship with you. As your rapport grows with the lender, their terms should become more flexible, increasing the efficiency of the financing and reducing the stress that this industry is known to cause!

Hope this helps. Best of luck!

-Ben

Hi @Felicia Dooley - I agree and think you should start "shopping around" and get the basics from all your possible lenders; terms, rates, fees, etc. However, most lenders won't be able to "preapprove" you, as the security is in the deal itself. Most all HML are asset based, not credit, meaning the sweeter the deal you present to them the more likely they are to finance it. Hope this helps. Best of luck!

-Ben

Hi @Sheri H.  

First, you are doing the right thing by shopping around and asking the network on here! As people have mentioned, every deal and every lender is different. As you get some preliminary quotes, you will start to see some common ground on what is an acceptable interest and origination charge on HML. Being a lender in CA, NV, AZ and TX, these rates seem a little high to me.

Points are determined in part due to the riskiness of the project, but also the term, LTV and experience of the borrower (all also consideration for overall risk). I would think that your loan should be closer to 3 points.

First time flippers that lack experience aren't a huge risk, in my eyes. With all HMLs, the security is in the deal itself. So if you are finding great deals with large margins and clear exit strategies that are supported by numerous strong comps, the rates shouldn't be increased due to experience alone. 

The interest is on the high end as well. Maybe that's normal for local TX lenders, we never charge over 12% no matter the deal.

In addition to interest and points, there are numerous other ways HMLs will charge unnecessary fees. These are commonly referred to as junk fees. Be sure to clearly ask what the "other" fees or "junk" fees are associated with each lender. This is anything in addition to the origination points and interest. For example, we have a $600 doc fee, and that's it. There may be processing fees, draw fees, fund control fees, appraisal fees, underwriting fees, etc. 

Prepayment Penalties are also very important to consider... there shouldn't be a prepayment penalty. After all, HML offer short term loans and want money back sooner, so it is pretty contracting to charge such fees.

Lastly, find a lender that wants to work with you on the long term basis. Your lender should be viewed as your financial partner and be giving you good advice and want to keep you as a partner for the long haul. Rates/terms should become more flexible over time. Once again, every deal is different, but your lender should want to work with you to build a long lasting relationship.

Hope that helps. Best of luck!

-Ben Stoodley

@Jay Luke I don't have any wholesaling-specific marketing techniques. As is with all marketing, networking constantly and growing your network reach is the most important. Gather all emails and make sure to have accurate flipping requirements from your buyers when presenting them deals, that way they don't write you off as "just another wholesaler". Regarding finding Sellers, that's the name of the game! Mailers, emails, online, networking groups - real estate investment groups, etc. are all ways to get your name out there and attempt reaching them.