All Forum Posts by: Jeff Cichocki

@Darius McCormick, Congrats! that's awesome that you're thinking about it at such a young age. 

Find the local REIA's and Meetups in your area. Attend them as much as humanly possible. Network with the other investors. Offer to work for free if you have to gain some experience. You'll find it invaluable.

Money is never the issue. You don't need a ton of money to get into this business. There are lenders (private and hard money) who will let you do no money down deals (they may want you to have a mentor to help though). If you don't have a lender that will let you do it, use other strategies like seller financing and sub2.

This is very doable regardless of your age, experience or financial position.

Good luck!

Here's my thought...

You should be shopping for properties AND building a relationship with a lender at the same time. These activities do not need to be exclusive of the other. Don't wait to build a relationship with a lender before you go shopping. I think you're missing out on opportunities if you wait.

If it's a good deal, it's easy to get an HML to fund it. Obviously there will be some criteria that you may need to meet to qualify.

Having good lenders to work with is critical. You need to create the relationship, but you don't need to wait for it. Ask around at your local REIA for some recommendations. Who have others used and what was their experience. Not all HML's are the same. Even if they offer identical programs, they will differ in thought process, speed and helpfulness in helping you succeed.

Good luck!

Here's a couple of different thoughts regarding selling the property... 

1. Why not sell it with owner financing? You can wrap the existing mortgage with a new loan and pocket the spread between your mortgage payment and their payment to you. It's a good way to continue receiving cash flow without any of the expenses. 

2. If you seller finance it... Once you create the note, you could also sell a part of the note off and receive a lump sum of cash while still owning the majority of the note.

3. Why not sell an option to another investor. You could sell a piece of the properties equity and not give up the monthly cash flow (or maybe you do give up some of it).

Anyway... the point is that there are more options out there than just sell or refinance. Different strategies and solutions will have different pros and cons to them. But, if you consider some of the more creative solutions out there, you'll likely find something that works perfect for you.

Good luck!

As a lender, I don't like lending to a person. I prefer that the investor has an LLC and that I'm lending to it.

Why?

Because it shows that they care about their investment. It shows that they are planning ahead. It shows responsibility. I want to see our borrowers position themselves for success; not waiting to be sued personally because 5 years later the new owner got some mildew in the bathroom and wants to sue.

@Steve Buckman's insight into having an LLC is spot on. You should have one. You should have good insurance. You should have an umbrella policy. These things don't guarantee success or prevent a lawsuit. But, attorneys typically look for the low hanging fruit when they sue. Have your properties segmented off into LLC's can help you be poor on paper and potentially help you keep more of your assets if you get sued and lose.

It's a complicated and deep topic. None of what I or Steve said is the gospel of RE investing. But you should take the information and take a look at how it fits your life and your situation. Use it to the fullest to help guide you to success.

Good luck!

@Mike Jacovelli, I think the guy that told you a hard money was going to come after your family watches way to many mafia movies. Lol. Thanks for posting that. You made my day.

Good luck!

It's also possible that they are afraid (either they or their agent has been burned) of the financing falling apart at the last minute. Unfortunately, banks (and many other lenders) do the underwriting at the last second. And, typical lenders take 4-6 weeks to make that decision. No body likes taking their property off the market to end up putting it back because the buy can't actually get financed (for any number of different reasons).

@Adrian Hollifield, What @Odie Ayaga said. You don't need to finish everything in the house in order to get reimbursed. Assuming a 3 draw schedule scenario, have your contractor break his bid into 3 parts. When he completes each part, the funds are released.

When I'm lending here in Wisconsin, I don't put a traditional draw schedule in place for my borrowers. My schedule is more dollar driven. I ask that they not ask for less than $3,000 at a time. However, to be clear, just because you bought the water heater, doesn't mean you're going to get reimbursed for it right away. It has to be installed (completed) to be paid. If a lender is going to fund something for 123 main street, the funds and work needs to be for 123 main street. 

The reason that lenders look for completed work is because all too often things like water heaters, furnaces, AC units, appliances, etc, are bought and brought on site only to disappear to another project later. If they are installed, they are more difficult to move. Lenders don't appreciate borrowers who rob funds from one project to pay for another unrelated project. Robbing Peter to pay Paul will always end up getting you blacklisted by the lender.

Good luck!

@Lisa Eckman, The difference between a Hard Money Lender and a Private Lender is that the HML is a professional and does it for a living and a PL is someone who lends privately on occasion. Either or both could lend on a residential OO property or on commercial (anything for business or investment purposes). The type of lender doesn't have anything to do with what they are willing to lend on. It is a more of a designation of status, experience and underwriting practices. All loans that are against real property are technically asset based loans. Even banks give asset based loans. Underwriting practices are what differentiate banks from HML's and PL's. Banks are credit and income based lenders who secure their loans against a hard asset. A typical HML or PL will base the loan primarily on the hard asset and very little on credit or income. Their underwriting styles are opposite of each other.

I hope that makes it a little clearer for you.

As a side note, I looked at your profile. It looks like you are new to lending. Please make sure that you get completely educated before you start lending money on your own. If what you learn seems complicated, find someone you can trust and lend through them. Until you are fully comfortable with lending, it's a lot safer for you to lend through someone who is experienced at lending others money.

If you want to look into getting trained, there are not many teachers in this arena. I would look up Dyches Boddiford and Bill Bronchick. Both offer hard money courses and classes. Attending live is way better than just buying a course. There is one more guy out there that is teaching this, but his name escapes me.

Good luck & feel free to keep asking questions.

We have a similar clause in our standard real estate contract here in Wisconsin. It's very similar to what @Crystal Smith is saying above. Regardless of whether or not you make a cash offer, most agents (especially if they're dealing with an investor) is going to require a proof of funds. Either you have to prove the cash or the financing. My business partner is a licensed broker as well. But, we still prefer to do it the way we have listed. It raises fewer red flags when your dealing with a foreclosure and fewer red flags means a smoother closing. I can't tell you how many times I've had to help an investor did out of a hole because they wrote a cash offer and didn't mention that they wanted financing. When you don't, many banks and government agency's will now send out an addendum that limits where the money can come from. It's a bit obnoxious, but it's done to protect the seller and prove the legitimacy of the buyer. Our method usually prevents us from having to sign it.

Goof luck!

@Shane Womboldt, there are some hard money lenders who I've seen as low as 8% and 1 point, but the norm is 10+% interest and 3-5 points. The national average used to be 15% & 5 points; I'm not sure what it is right now.

HML's are going to have LTV limits. I've seen them as high as 70%, but the norm is 60-65%.

HML's need to see the details of the property. They need to see purchase contracts, rehab estimates, comps & CMA's (they'll still want to get an appraisal though), your LLC docs(if you use one), Trust info (if you use one), etc. No one lends money without a good assets and good documentation.

Legit lenders also escrow rehab funds if they are providing it.

If anyone offers you money and it's not inside these parameters, it's likely to be a scam.

Good luck!