All Forum Posts by: Bob Woelfel

@Ali Akhter yes that can be true. Think of it this way. A hard money lenders sole purpose is to work with investors and help them do deals. Most, if not all legit HML's are investors themselves. We are a second set of eyes. We look at the project, look at the budget, look at the numbers and get appraisals. If something is not right or the rehab budget is too low or too high we can make suggestions or ask questions. We require signed lien releases from contractors as well so we can help protect ourselves and our investor clients. We won't be there swinging the hammer obviously, but I do feel like we provide a significant amount of value to investors over and above just the financing part.

A private money lender...say a friend or family member is many times relying on you to be the expert.  After all, you probably went to them and said you were flipping houses or involved in real estate...blah blah blah.  So they told you they have some money they might be able to invest.  They are typically going to want to be hands off, otherwise they would do it themselves or at the very least set up a partnership with you and hopefully get more than the interest rate for their return.

Hope that helps.

Totally agree with what @Alex Bekeza said.  Turn the situation around...if you had 250k or 500k to lend, would you offer it to someone for a 5-6% return on a risky real estate deal with a newbie?  I use "newbie" as a general term because those are the folks that are normally out there attracted to those teaser type rates.  What people need to realize is there is a cost to money and unless you have a stabilized asset held long term by a bank, then 5% is a dream.  The only people taking returns that low have significant amounts cash and they are in capital preservation mode.

We do a nominal fee for a credit/background check and the client pays for the appraisal.  That is pretty standard and that is all the client pays for prior to closing.  Don't ever give money up front to get approved or pay for anything else.  Get with a lender in your market who you can actually meet, shake hands with an who has a reputation to protect.  All these online lenders can have some value, but so many people get sucked in with low rates that are not reality and get taken for a ride.  Good luck.

Hey @Kyle Coleman I would check around in your local market. Every lender is going to be different. We lend 100% of purchase and 100% of repairs up to 70% of ARV in Kansas City. If you find a good enough deal you could in theory buy it with no money out of your own pocket. I'm sure there are a number of local HML's in your market. See what everyone else charges and what they look for in a deal and in investors. I will say though that we are pretty similar in terms of what we look for. A new investor that hasn't done a deal with us or done rehabs in the past is perceived to be a higher risk than someone we have worked with in the past or knows what they are doing.

At the end of the day it's going to be deal specific as to whether or not it's worth it.  If you find a great deal then it's almost always worth it.  Sometimes you find a deal that will still work, but maybe you have to bring a little more money to the table to make the lender happy.  If you can knock out a few deals though in the beginning an improve your rates/terms then you may have a lender to do all of your deals.  Good luck.

@Anthony Johnson this is a little above the field I typically play on, but it sounds like your client has had a bad experience before and this process is making them uneasy as well.  There's a decent chance everything could be fine, but just as good of a chance that your client pays the 1% and gets nothing again.  If this is standard operating procedure then you might feel fine with it, but if your clients gets nothing there's a chance they may come back to you and be upset.  Wish I could help more.

@Barry Joel Barr Yes you can find these deals, but most of the time they are in areas you may not want to buy.  I did however find a 2% building about a year and a half ago that was in a decent enough area.  Typically these types of assets will be somewhat riskier though, which is why they are selling for that price in the first place.

The 1% and 2% rules are just really quick snapshots of a property to see if it's worth anaylzing further.  You shouldn't be using these basic concepts to determine if you are going to buy or not.  You need to do a full analysis of the property to determine if it will cash flow and how much.  The 2% metric is worthless if for example you are paying for water, electric, gas and your taxes are crazy high.  Then your expenses will completely eat into the gross rents and your property might cash flow significantly less than the property next door that was maybe a 1% deal.  Stop using this metric for anything more than a quick test to see if you should go further. 

@Anthony Johnson is your client working with a bank or mortgage broker?  If yes then I would say that is strange. 

Now if they are working with some type of private or hard money lender I would maybe understand the question a little more, but I would then wonder why your client is working with someone they aren't sure has the funds to begin with.  Somewhat strange all around.

@Fred Krueger we run on anyone over 18.  All pay the fee and all are on the lease.  

@Ed Engstrom...glad to help.  Good luck.

Hey @Steve Strickland...i'm an investor, agent and I represent a HML in KC. I'm sending you a DM. Would love to connect and discuss.

@Jennie W. we purchased a six unit building similar to this just under two years ago.  We have a community bank we work with that has done most of our long term hold deals.  It's a 20 year term at 5% but our cash flow is very strong and it's not in a bad area. I do not know if they lend to out of state investors, but worth a shot.  PM me if you want their info.