All Forum Posts by: Ian Hannon

Hi Darshil, I ran the deal as if I was doing the project and my all in number including closing costs on the back end was closer to 680 accounting for soft costs. There is still some margin there but it is important to account for everything. I also would actively learn about construction, as relying 100% on your partner can leave you vulnerable to being taken advantage of.

I would second what @Jonathan Greene said-I work in hard money and have a ton of relationships outside of my own company in the space, and I don't know anyone doing 10% down post covid. I would just be careful of anyone over-promising anything right now

If it is for the longer-term, Mantua could be a good move. I currently have a triplex going up there and have seen a ton of development in the last couple of years. It definitely still has a ways to go, but I like the long-term prospects being so close to Drexel and UPenn. 

Hey Howard! I'm in San Diego as well. I flip and rehab homes back home in Philadelphia, but it took 2 years to build up a trusted team and partners on the ground. I would tend to agree with @Dan H., unless you are incredibly confident about your team, it is way better to make 10-15k in an assignment fee than losing 40-50k in a flip that went sideways. Good luck!

Congrats on getting started to everyone on this thread. I’m coming up on 2 years flipping and holding myself and have completed 7 projects and I feel compelled to touch base with new investors because I learned a ton of things the hard way. These are a few things I have learned over the past couple of years:

-Get everything in writing with any partners, contractors, or anyone else that affects your project. I have been fortunate to have a couple of great partners, and having things in writing is especially important in maintaining relationships that are already good, in addition to protecting yourself. My operating agreement with partners is nearly 3 pages long.

-Even if you happen to like a specific contractor, I wouldn’t put them on more than 2-3 jobs at a time. It puts you in an exposed position unnecessarily. Even if they are good people, they hold all the leverage when they are on all of your projects. I would also have a system for vetting contractors and never stop looking for new ones. Also, always make sure you are listed as “additional insured” on their insurance policy and confirm permits have been pulled before they do any work.

-No deal is better than a tight deal. Don’t force anything and be patient. You will get farther ahead if you do this.

-Always run your own comps and never take anyone's ARV assessment at face value, especially when buying from wholesalers (which I still do). Always overestimate your construction budget and underestimate your ARV and make sure the deal still works when you do that.

-If you’re new to the construction side of things, teaming up with a construction expert is huge, even if you have to give up some equity in a deal. Even seasoned pros run into problems with construction.

I hope this info helps. In addition to this, I always enjoy helping newer investors navigate the funding side of things and do so on a daily basis with my company. I am passionate about being a resource for newer investors so they can have less speed bumps than I did. Have a great day and good luck out there!

Hi Nancy-the most common scenario is you would have monthly interest-only payments starting the month after closing. Something to consider is whether or not the lender charges interest on the whole loan amount (including construction budget) from day one or if they prorate the interest based on when you draw the funds. I would also note that most lenders have 12 month terms, so it's important to know what your rate/situation would be if you were to go over 12 months for whatever reason. Good luck and let me know if I can help with any other questions!

@Account Closed returns vary and could certainly go higher, but I was referring to someone taking a relatively passive and lower-risk option of investing in a fund that invests for them, as was suggested to the OP in an earlier post. The other option Manuel was looking at was to lend his original 2 million as a lender himself, which would yield a higher return, but has more risk and moving parts than simply investing in a fund. My point was that either path would be good, it just depends on the risk someone is willing to take on. 

Congrats on the results you are seeing, it looks like you have a system that is working really well. I would say your returns vs either of those options would be comparing apples to oranges as they are different models completely, but it looks like business is good and I wish you continued success!

Hi Corey-congrats on getting started and being proactive. Here are some things I would ask a hard money lender:

-what's the typical down payment needed/leverage offered?

-do they charge interest on the whole construction escrow from day 1 or is it prorated as you draw construction funds?

-length of loan options

-if they are familiar with your area (not imperative but extremely helpful)

-what any up front fees are, and any fees for construction draws

-process for construction draws and typical turn-around time

-whether or not they lend to first-time flippers (some don't)

There are so many hard money lenders out there and you will likely find a variety of different answers to all of them. Question 2 is very significant and can make a difference of thousands of dollars on your project, especially if you have delays for any reason. Good luck with your first project!

Hi Edwin-if you are out networking and find a potential borrower, you will have many options to place the loan, as most lenders are looking for business and have broker programs established. If you are looking for a full-time position, I would look at job listings and you can sometimes find people hiring that way.

More often than not, I have seen 6 month seasoning requirements, but there are local banks/credit unions that can have more flexibility with that in my experience. There are also non-conventional lenders that will lend on a property as long as the debt service minimum requirement is met (I have seen 1:1 up to 1:1.25), as opposed to a full-doc conventional route. Many of them have more lax seasoning requirements but the rates are a good amount higher.