All Forum Posts by: Eric Loya

@Josue Rivera Of course! Feel free to reach out my way with any other questions.

Currently, yes, I invest in California primarily but lend in a few different states across the US. I've also taken on investment projects in Dallas Texas and Savannah Georgia with partners in the past. 

@Josue Rivera Glad to hear you're already taking action on your investing goals! Talk about being an early bird to setting those 2018 goals ;) I just responded to a request for more info into the hard money process, and I thought this would serve you well going into your next deal.

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.

Hopefully this gives you more insight into securing your next lender!

@Lelith Walker First thing to understand is that hard money and private money are like apples and oranges, two completely different beasts. Hard money is easier to secure, and can be found simply by searching the Internet. Private Money is a relationship driven connection with an individual willing to lend their personal funds for your real estate endeavors. These people can be found at local real estate investor clubs and meetings.

When evaluating hard money, you should focus on 4 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) 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.

2) 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.

3) 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.

4) 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.

This should help you with understanding hard money. Message me if you have questions regarding private money, I don't want to write another full-blown essay on this topic ;)

@Kevin Guyden You should be able to shop around for hard money lenders that are asset based lenders, not income based. With that said, you'll still need to bring capital to the table for your next deal and also plan your exit strategy of either selling or refinancing once the project is complete. 

Partnering with a private lender is an option to accomplish this, as well as seller financing. I'm sure there are forums and investors with experience on BP you could tap into for more insight!

@Nick Tolson Glad to hear you're gathering all the pieces to take on your first investment project! The construction experience will definitely come in handy in this line of business. As a local investor/lender in the So Cal market, here's what I'd recommend given the info on your post:

1)  Investment deals are extremely competitive in this market. Investor buyers come in and close quickly (2 weeks or less) with little time (if any) for contingencies. With that said, buying investment property all cash with no loan is your best best for the highest returns and the quickest/cleanest closings.

2) Traditional financing (i.e. conventional, FHA, or VA) would not be the best fit for this strategy. Sure you may have a better rate, but FHA first time home buyer loans are for owner occupied use only, and requires you season the loan for at least 1 year. More than that, these loans take weeks to process and need to meet certain appraisal and physical inspection standards before close - a nightmare to deal with if your the seller of a distressed property, and reasoning as to why they would choose another cash offer.

3) If you do decide to leverage with hard money, you may be able to work the rate down with a higher down payment 20-30% or more (each lender varies on this, but it's definitely possible). 

A HELOC would serve you better than a cash out refinance because you'll be able to draw funds on an "as needed" basis rather than taking a lump sum and having the money sit and paying interest. This is your best source of financing if you decide to leverage without hard money.

There's many ways to skin the cat, but hopefully this gives you some detailed insight into the options available. 

@Tyler Shaulis Hey Tyler! Glad to hear you're seeking options to get into the real estate investment game. Good idea to acquire a property under market value, and build that "sweat equity." It will payoff in the long run as you build your real estate portfolio.

Take into consideration the FHA 230(k) loan. This program offers a low down payment option used to finance a primary residence, and also provides funding to conduct repairs on the property. Depending on how good a deal you secure, you may be able to refinance in a few months/years and pull out the equity to take on flips of your own down the road.

@Carl Harris Jr The good news is that you can usually acquire between 4 to 10 personal loans before financing becomes more difficult. Each lender has a different requirement on the amount of personal investment loans offered, so you'll want to call around and do your due diligence on the right lender for you.

Most lenders will credit the rented units up to 75% of the gross rent, however you're correct in that they may require a certain seasoning period to include this as revenue to qualify for a traditional loan. 

In regards to the hard money situation, some lenders have programs specifically designed for acquisition of buy and hold property and are willing to extend terms out to 2-3 years with better rates than fix and flip financing (as lenders see this as a longer term commitment and less risk).

@Adam Read Hey Adam, it's great to hear your curiosity to continue growing your real estate portfolio. Perhaps @Kevin Romines could shed some light on finding the right traditional lending program for you, as he's in that lending space and in your state. I'm not sure there are many other programs available for fixers other than hard and private money.

As a hard money lender/ and investor myself, the only key factor missing is knowing your exit strategy on your next project- which can determine the length of a hard money loan. 

Flipping the home would result in a faster sale, which would pay off the principal balance due to the hard money lender upon sale- most flips are complete within 4-6 months if you take on an easier rehab and price the property appropriately. Most hard money loans are interest only payments with a balloon payment due in 1 year. Some lenders even offer the ability to extend the term of the loan if needed.

If you plan to buy, renovate, and rent for cash flow, you'll want to ensure you can qualify for a traditional refinance within a few months/years of taking on the project. This is something a traditional lender can analyze with you before you even make the purchase. In this case, there are hard money programs with 2-3 year terms to accommodate this strategy as well.

@Gregory Flores, Jr. Hi there Gregory, I'm excited to hear about your new ventures into real estate investing! It sounds like you've got the right state of mind towards landing your first real estate investment deal (secure mentor, start business entity w/ attorney advice, build team members, etc). Also, your background in finance will definitely help you land more private capital down the road.

The relationship with your mentor could take many angles, including equity split on deals he sends you (that's how I started with my private funding sources) or flat fees. It sounds like he has processes down for the rehab and resale, so I'd say if you could work a wholesale fee up front, it'd keep the deal clean, and his involvement limited through your transactions.

I work on the hard money lending side, and we are a direct lender with the ability to lend in your state, as well as close transactions in as little as 5 business days (helps land more deals when you draft short closing timelines on purchase contracts).

Let me know if you'd like to chat about your journey and how we can work together!

@Bryan Miller With a foreclosure date so close, it's going to be tough NOT to lose the property. Even with a cash investor coming in to save the day (since that's who will probably buy it at auction anyways) the processing time with escrow and title, along with the fees owed may take longer to calculate than the timeframe until the scheduled sale date. 

The best bet right now is to postpone the foreclosure date by filing for bankruptcy or listing the property for sale and notifying the lender. This will buy him a bit more time. However, given his credit and recent delayed payment history, a traditional refinance is out of the question. He has to come to terms that his best bet is to sell. 

By doing this, he will capture the most equity and can go buy a home for half the price all cash with money left over to repair his credit, etc. If he lets it go to foreclosure, he will recoup less, as he must take into account foreclosure fees.

I work the California market and have many resources available. Message me know if you need a realtor connection/ bankruptcy attorney that specialize with this type of work.