All Forum Posts by: Clayton Silva

 Correct

Hey Adam, I would be prepared to give up most of your equity to be frank. a 2.5MM project with 150k is less than 6% of the total project in equity. The bank is going to typically finance between 65 and 75% of the cost depending on the ARV. If I was an investor financing the remaining 29% - 19%, I personally would expect my equity split to be reflective of such. I would also be analyzing you as an investor. Are you just bringing me land, do you have any experience in development? In property management? In putting together a deal? If not and I have to go out and build the team and organize the deal, I will factor that in too. So depending on your experience, if you are bringing a piece of land and some plans, I the outside investor would want likely between 80-90% of the equity if I am providing all the funds for closing, the experience, and the reserves, just to be honest on something like this. If you have the reserves and you have a ton of experience, you might be looking at keeping between 30-40% equity on your side.

Edit: And taking 10-20% equity on a deal like this with an experienced investor might be completely worthwhile and life changing to be clear. If you can JV for a seasoned developer and investor on a deal like this and make 10-20% of the upside while tagging along and learning from their experience, that education is going to be worth way more than trying to get a 50/50 split or something like that. Education and skills are worth infinitely more than just the exit on one transaction.

I've worked with Celtic.  While they are very nice and I believe good people, I have had a few deals fall through after months of hard work on them because they do not fight for the deal in my opinion.  They rolled over on a deal that was pretty cut and dry in my opinion, and really let me and my client down after months of dredging through paperwork and underwriting.  I know that is the name of the game in SBA and it is a nightmare process for anyone that has been there.

I tried for over a month to use it and to get approved. For context I am a full time lender and understand DTI and have very good credit. I could not get a human to answer any of my questions and could not get the system to let me through. It was weird. May just be a one off experience but that was mine. I have other HELOCs that were much easier to get both personally and professionally.

All that to say, if it doubles the cash flow, it doubles the cash flow. It will increase the value even to investors, you just may have longer days on market when you want to offload because fewer buyers will have access to a loan like that. Not a lot of people know this, but two veterans can actually merge their VA entitlements and purchase up to a 6 unit with a 0 down VA loan which is cool.

Thanks @Noah Corwick for the recommendation!  @Christopher Robert Noland hit the nail on the head mostly. Only caveat I would add is that the OP mentioned that they no longer live in the property which takes owner occupied options like FHA 203(k) off the table. I think if cash is tight, it may be wisest to consider sale. Since you lived there more than 2 years in the past 5 most, if not all, of your capital gains should be tax free.

 Correct, and having the hard conversations ASAP as they come rather than letting things get worse is critical

The common theme from this is definitely last minute fees.  Not to justify this, but it is super important for lenders to have the hard conversations up front.  Much of the time there is a reason for a last minute fee increase.  Common reasons:

1) Change of closing date (instead of closing end of month, if it gets pushed to beginning of next month, prepaid taxes, interest and insurance will increase because you have through to months end)

2) Appraisal comes in low and LTV goes up. If your LTV changes from say 70 LTV to 80 LTV or even from 79 LTV to 81 LTV it can put you into a different interest rate pricing bracket and change the cost of rate.

3) Changing vesting at the last minute to an LLC can require a last minute legal review.

Now all that to say, there are definitely junk fees and other last-minute nonsense that gets added so lookout for those.  Working with an LO that is willing to have hard conversations as soon as they come up can help set expectations throughout the process.  

Just sent you a DM

I manage the vacancies, leasing, contractor and inspection appointments, but honestly the Turbotenant software I use is really user friendly and handles rent collection and what not.  I do have a realtor in the area as well as a general contractor I use for most of the repair work.