All Forum Posts by: Farley Youman

Lucy: your story shows that setting up a loan is more than just interest rate and other terms. When the deadline approaches you need a person to push it through in time.  That is my focus when I set up loans for clients- and I will go whoever is going to slow to meet the deadline- appraisers, lawyers, etc. 

Also- please note that most first time flippers need an experienced partner or trainer to avoid these pitfalls and to be successful. Good luck and let us know how it turns out.

Jeremy stated that he could have made about as much wholesaling the deal. Besides the stress, the other main factor that I want to point out is- time and use of money.

Wholesaling would have been much faster and that money could be used for the next deal faster. Real Estate is not just about the money made money per deal- it is about the amount of deals per calendar year times the amount of profit.

For example: would you want to do 2 flips in a year and make 140K on each for a total of 280K. Or would you want to make 100K every 3 months on Wholesaling for a total of 4 deals and make 400K?  Of course you would want to do the latter.  Pretty hard to make 100K on wholesale deals, but with an apartment complex or occasionally with a residential house it has been completed before.

Matthew: Your post was 9 years ago! How did you end up doing? Like you, I have done wholesaling of SF houses, and am now thinking about apartment complexes.

Jeremy makes some great points. The amount of time makes a big difference in real estate. This deal took Jeremy 7 months. He does not state what his experience level is, but I have a feeling that this deal would have taken a beginner about 12 months to complete.  I set up loans, and with this amount of months, you could be "swallowed up" by the interest and not make much money- or worse yet run out of money.

-If you are a new investor, just wholesale and watch the flipper to see how things went. You will learn what to do-and maybe more importantly, learn what to NOT DO.

-Finally, there is only so much time in the day. Instead of focusing on this nightmare house for 7 months, what if 3 wholesale deals were completed? As Jeremy said, it is not just about money- the amount of extreme stress also has to be factored in.

Banks will take too long for most investor properties- especially in cities like Atlanta where the property will sell fast (and the seller wants their money fast).  I have investors that I set up loans with private money that only use this method because of the speed. Finally, we do not care about your tax returns, etc.- since these loans are primarily based off of the asset as collateral.

Gottfried:

Hopefully you and your wife are still into real estate.

You or anyone else can join us on Oct. 2 (6pm) at the Tailgate Brewery on Market Street in Chattanooga for this real estate meeting.

The topic: Instead of Fix/Flips- making money with New Construction. 

We will be at the deck upstairs. Great weather and networking!

Good comments from everyone, but of there can always be exceptions in rare cases.

Consider that I set up a loan in Tampa where my client put no money down at all. This was just for a single family house, but the loan was for 1.4M!

The way that I set it up along with the client:

-Client got her long time friend to put up 200K for the deal at closing.

-I attached this second loan to the first one I set up. Some lenders do not allow this- but I found one that would.

Final note: this is the ONLY loan that I have set up in multiple years of doing loans. So, Don is right, this is not normally okayed (no financial skin in the game). 

Finally, as Chris mentioned- this deal has some additional layers of possible risk.  Lenders are very cautious, and the ones that I have seen over the years that are not- are not in business anymore.  Always ask yourself, if this was your own money to lend to someone else- would you loan it out in this situation? I wish you luck- or to find a partner who will put the down payment for you.

You mentioned a bank. I am not sure if you have looked into a hard money loan- which is what I mainly set up.
-Depending on the size of the deal, I may be able to set you up with the deal/loan-even if you do not have experience. If a bigger deal, most lenders will want you to partner with an experienced partner.
***However, hard money loans do not look at a person's income and taxes.
I am setting a loan in SC for 6 units that will be using the seller in 2nd. position-this greatly reduced the down payment for my client!

Great advice Jeff.  I set up loans for lenders and they are very diligent on exactly how the insurance is written up.  The best thing about setting up loans is not only do you make money (and cannot lose money)- perhaps the best thing is how much you learn as a loan rep (especially if you are new to real estate). Just looking through the emails from the lenders to the insur. comapany will show a lot of what makes up a great insurance policy. Finally, look at lenders that have been doing this a long time- they have insurance companies that they usually use (if the client agrees) that know exactly how to write it up based off of the lender's stringent guidelines.

Could someone contact me that is interested in loaning for a single lot here in Atlanta?

***This loan could come from a company or a private individual.

Purchase price is for the lot is 100K. Client needs the loan only for 20 to 30 days.

I will be setting him up for the construction loan by that point.

Construction costs are 375K and ARV is 750K.