All Forum Posts by: Bryan Hartlen

@Hoa Nguyen it depends on your terms. Some HML charge you interest on your max loan amount from day 1 (they call this Dutch interest or loan) others only charge on funds actually drawn. If your loan is interest is Dutch (charged on max loan amount) you should sharpen your pencil and balance the cost of the overestimated rehab costs before closing - make sure you know how much playing it safe is costing you.

Regardless of the type of loan (Dutch or non-Dutch), HML's only provide rehab funds for work completed after some kind of inspection (in-person, photos). They call these draws. The max amount of the draw will be from your agreed rehab budget. Most HML will let you make draws less than budget and some will let you make partial draws (eg you have $6000 for new floors, you draw $3000 against the floors completed in half the property). Most HML charge a fee for each draw. So optimizing your draws will improve your return. If your loan is Dutch, there's no incentive on you to draw less than budgeted (you are already paying interest on the full amount). If it's non-Dutch, you'd typically only draw what you needed (especially if your lender allows partial draws). The other consideration for non-Dutch draws is if you came across an oh-$hit in the project that wasn't budgeted for. In these cases, you can use the full value of your budgeted line items to help offset the out of pocket impact of the oh-$hit.

At the end of the project when you close the sale of the property, you'll have to repay what you borrowed. Any ‘left over' rehab budget, doesn't matter you only repay funds received from the HML.

@Brandon Stiles the process steps are identical - how you execute them is different. Key differences for us include:

- we JV with local person on our deals. Their jobs include finding properties (he's a realtor), walking properties prior to purchase (only those we can't estimate rehab from pics), inspecting GC's work and progress.
- unless the property is a complete gut job we pay for a home inspection during our due diligence

- we only hire GC’s.  Bottom line quote that we pay out in specified milestones (which align with our hard money lenders payouts).
- besides or JV partner watching progress, on completion we hold back a portion of the payout pending a final residential inspection.

We do 2 or 3 flips a year. We could do more but finding properties is (at least for us) the hard part of flipping remote. That's actually what prompted us to JV with a local realtor. So they could network for us.

The other headache is that we seldom get to start and finish the job with the same GC. We now spend much more time interviewing and qualifying our GCs and lean hard on referrals.  We’ve also learned that the lowest price almost always means trouble down the road. 

Agreed. That’s why I said “it could”. And for what it’s worth, we’re in the middle of a complete rewire from 2-wire (not even knob and tube) in AL because of the inspector’s view of the code for that particular city. So it can happen. 

As already noted it can be dangerous if the sheathing is cracking.

Aside from this there’s a real business implication of closing without replacing. If you ever plan to rehab the property and have to pull an electrical permit you could be required to do a complete rewire. Your local inspector office can shed light on what conditions would trigger a full update. Assuming you don’t end up ever having to update it will be an issue when you go to sell the property. In the same way that you are concerned now, future buyers will also be. It could cost you on sale price or concessions. 

@Christopher Dunson I have the tool page bookmarked (https://www.biggerpockets.com/investment-calculators) and it’s working.  

** edit sorry just realized your problem was with subscription **

Why not LVP in kitchen also? I’m assuming it’s not a class A rental so LVP could work. It wears well and is waterproof?

@Timothy Hero this is not something I'm looking for to limit my risk (although it is a benefit).  It is a legal requirement on SDIRA and SD401k's.  Any loan secured by SDIRA/SD401k must be non-recourse or the beneficiary's entire SDIRA/SD401k holdings are subject to disqualification (ie they become immediately taxable).