All Forum Posts by: Eric Loya

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@Jeannette G. Sounds like you have a lot of moving pieces to this dilemma, but with patience and some time, I think there's a solution. You're on the right track with your thinking.. securing an experienced investor on the front end will be crucial to securing the specific home that matches your criteria - as well as customizing the home to your parents liking. 

Buying out the investor with a bridge loan is also enticing to an investor as it cuts down holding time and costs - and gives your parents time to sell their property and move at their leisure.

I grew up in Los Angeles and have a local experienced investor who would be a great resource for this particular situation. I'd be more than happy to make the connection.

@Salina Knox Congrats on getting involved with BP! Looks like you have a few options getting started in the game of real estate. If you're seeking fix and flip deals, the primary loans available are hard money, as most conventional loans need the home to be in livable condition and pass physical inspection. Expect 1 year terms with interest only payments (8-13% roughly).

Hard money gives you the opportunity to compete with cash investors, but usually require you bring 10-20% down on total project costs. When it comes to flips, you need to dial in 3 things - Resale Value, Repairs needed to achieve resale value, and purchase price. Keep in mind holding costs (if you're borrowing from HML and private lenders, cut your gross profit in half as a rough rule of thumb). There are tools out there to help estimate net profit, just dig around BP and you'll find what you're looking for.

If you need private capital on top of hard money (aka gap funding) you can meet them at local REIA (real estate investor association) meetings. Mastering these items should get you going in the right direction!

Real Estate Investment Financing available from DIRECT Hard Money Lender!

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@Luke Kohls Hey Luke, I've found that the best place to find private lenders - not hard money lenders - are at real estate investor meetings (aka REIA's). Meetup.com is a good place to find these types of meetings and smaller sub groups as well.

Hope this gives you some traction of where to go!

@Will Biestek Every hard money lender will operate differently. As people on this thread have mentioned, you can expect to pay interest only monthly payments on a 1 year term (i.e. 12% on $100,000 = $12,000/yr or $1,000/mo) and origination points to close the deal (i.e. 2 points = 2% of the loan amount - $2,000 + typical closing costs). The balance of the $100,000 principal will be due upon resale of the property.

Some lenders may require an appraisal to ensure the resale value is as you state, which is normal in today's market for hard money. If that's the case, expect to pay $300-$600 to the appraisal company directly. If a lender ask you to pay this to their personal/business account directly, be weary. All other fees (origination fees/down payment/closing costs) should be contributed to a 3rd party escrow/attorney account before closing on the property. 

Hope this helps you navigate the waters!

@Steven Gough it's good to see that you're vetting lenders before moving forward with a blind offer. As someone in the space, you have to be careful as there are lots of scams out there that will take your money and run. A few tips for ya

1) Ask the lender for recently funded addresses - reviewing with a title agent, or having a real estate agent pull a title search will show if their entity actually had/has a lien on projects in the past.

2)  Ask what funds are required up front - most lenders will charge an appraisal fee around $300-$500 and will usually have you pay the appraisal company directly. If they ask you to deposit the funds into a personal account be weary.

3) Verify the representative/company on social media - LinkedIn or Facebook should do the trick. 

4) Verify company address on Google - google maps, even a phone call to the main office could give you valuable insight into how the run shop.

Hope this gives you some avenues to ensure you're getting into a profitable relationship!

@Davidson Francois Good question! Picking the right HML can be the difference of getting a deal funded or not, and even saving a few thousand on costs.

When evaluating hard money, you should focus on 5 aspects. Keep in mind the costs are much different if you decide to fix and flip, or buy and hold - so knowing this exit strategy ahead of a conversation with a lender will make life easier for both parties.

Here's what you should ask:

1) Are you a Broker or Direct Lender, and what’s your estimated loan volume this year?

- A broker is someone who brings your financing request to a direct lender, then adds their fees on top of what the direct lender charges. A broker may have more available resources for funding programs, but it may cost more, take a bit longer to process, and depending on how many lenders view your file, could hit your credit more times than you’d prefer. Direct lenders are straight to the source, which may result in lower fees, will speed up the processing time to close, and preserve your credit score with simply 1 source pulling that information. Knowing how much volume someone does on a regular basis will let you know how much capital they have on hand to lend. The last thing you want are great terms and no money available when you land that next project.

2) What are your rates, and how are they calculated?

- Usually hard money will offer between 7-12% with lower rates offered to those with more experience, better credit, and more capital contributed to the deal.

3) What are your LTV's, (loan to value) and do you lend based % on resale value or purchase price?

- Most lenders will lend between 65-75% of the resale value, and may offer a variation such as 80-90% of purchase price including or excluding rehab costs up to 100%. Each lender is different, so this is an important question to ask.

4) What are the origination costs, and other "junk" fees?

- You can expect between 1-5% as an origination fee - also known as points. Other fees may include appraisal, processing, application, etc - so it's good to know these details up front before you decide on a lender based on interest rate alone.

5) What do I need to qualify?

- Lenders may require a business entity in order to secure lending, some may not. All lenders will want to verify proof of down payment, closings costs, and a variation of monthly interest reserve (3-6 months). Some may require a minimum credit requirement and even US citizenship.

Hope this gives you some ammo when deciding who to work with next!

@Jerry Collins It's possible you could find a lender who would consider this, should his income show enough strength to handle the additional expenses of a home equity line.. If your cousin has a cosigner with better credit, that may also help him access a traditional HELOC

If this is a non owner occupied property currently, it's likely a hard money/bridge lender would consider financing this as well- just expect higher than conventional rates (8-12%) with interest only payments and 1-2 year terms. Usually these lenders will offer 55-65% of appraised value, with a fund controlled release on any renovation work needed to be done. At $1.4M renovated value there seems to be enough equity to help realize your cousins game plan.