All Forum Posts by: Jeff Cichocki

@Dallas Darr,

Welcome. You'll need to upgrade your account to at least pro level and then post in the marketplace. BP has rules against direct solicitation in the forums. BP reads every post on this site. Anything they deem to be in violation of the rules gets deleted. If you get caught to many times, they can delete your account. So, be careful as to where and how you market.

If you want to indirectly market, be active in the forums (it's time consuming). Answer questions; even if their not about lending. Be a resource. You'll attract people to you if they find what you offer to be of value.

If you're effective at attracting people, your phone will ring more. Be prepared for the additional time it takes to service the people who are curious about your rates, terms and how the programs you offer will benefit them (learn to manage your time). Most calls don't lead to loans. Some of the connections you make will turn into loans down the road. Most will just die after the phone call.

Good luck.

@Raman Saka,

There are lenders out there that work with new investors. I know you said that you think HM is expensive, but let me run this scenario by you...

You have limited financial resources. You have a property that needs some rehab work that you want to keep as a rental. And, lender's don't like to lend on rentals that need work.

How do you solve the problem?

You tackle the problem in two steps...

1. Buy the property with a Hard Money or Private Money loan. You can typically get up to 95% of purchase price and 100%. If you don't have the 5% down plus some funds to cover closing costs, you can bring in a partner who does.

2. Get the property rehabbed.

3. Get it rented.

4. Refinance it to either a conventional lender or a non-traditional source that is more flexible than banks. It's up to you. But know that refi rules are way less restrictive than purchase loans are. This is the easy part. Some lenders will even allow cash-out at this time to help you build up your cash reserves.

What I just described is the basic premise of how BRRRR works. There are lots of people doing this all over the country. You just need to find a lender who will work with you to accomplish it.

Good luck!

@Odayne Daley, One of the best things you can do is to start attending (assuming your not) the local REIA's and Meetups in your area. You will find lots of people there who are interested in and doing what you're looking for.

Good luck.

@Christopher Campbell,

As an investor, I have to agree with what @Rick Pozos says. He's spot on. Unfortunately most wholesalers don't really understand why the numbers have to be where they are. Realtors struggle with the same thing. It seems like everyone wants to look at the $100k ARV house they bought for $70k and scream "look at the $30k in profit". When they do that they fail to finish analyzing the deal. The $30k is the imaginary unicorn you reference in your post; it's not the 50% or 60% that you elude to. Real investors who understand that this is a business and that businesses need to make a profit to stay in business need to buy at steep discounts in order to be able to eat. Anything less than a 40% margin is suicide in the long term.

As a lender, we look at the same thing. We don't normally talk about a borrowers success and profitability, but we absolutely need our borrowers to be successful and profitable. All our criteria is driven around making sure that's the case. Anything less, and it's simply a bad deal.

Good luck.

@Debbie Consalvo, two friends of mine wrote a book a long time ago called "Definitive Guide to Running a Successful REIA Meeting With a National Speaker". Even though it's written for speakers, there is a ton of really valuable information in there that applies to every meeting and every speaker you bring in; local or national. It's not in print any more and the only way I know of how to get it is directly from one of them. However, I have a couple of copies. I'd be happy to send you one of them. If you're interested, reach out to me via DM and we can work out the details.

Good luck!

@Alex S., 

My wife and I built our own home. I'm not a licensed general contractor, but because of my experience, I was allowed to act as my own GC. Also, neither my state nor my county require a licensed GC to build the house. They only require licensed professionals for certain parts of the house (plumbing, electrical).

I would shop around to all of your local banks and credit unions. Local banks and CU's can be a lot more flexible than the big banks. You will likely find one that will let you do it.

Good luck.

@Paul Charles Bayliss, 

First, @Odie Ayaga is correct. HML's don't like second position in the property. You won't likely find one that will agree to it.

Second, It's not likely that you'll find a traditional lender that will let you borrow additional funds to secure the down payment. The more you borrow, the higher the risk to the lender. When you max out loans like that, you are chewing up your cash flow. No one want to lend on properties that in the range of break even. Lenders need you to be successful and profitable. They don't typically state it that way, but that's what they are really saying with all the rules they have.

Regardless of whether you go with a traditional or HML for funding, you are going to need to have some of your own money in the deal. Your lenders are also going to require you to have some cash reserves.

My statements are generalizations based on the majority of the industry. There are ways to get no money down deals. But, they typically require some more advanced training and strategies. You need to get some more experience before you start dabbling in the world of creative finance.

Good luck.

@Julio Velazquez,

HML's are not all created equal. Rates & Terms are important, but there are other things to consider as well. Many investors go out shopping for what they think is the cheapest money so that they can make the biggest profit possible. I agree with it in concept. Both my experience as a lender and borrower for my own projects, cheaper is rarely the case. You also need to ask about fees. And I mean all of them. Is there a fixed cost type of fee at closing, are there draw fees, is there a minimum amount of interest due, is there a loan termination fee... The list goes on. There are a lot of lenders who offer cheaper rates & longer terms who fee the heck out of you along the way. When you are out looking for a good lender to work with, you need to get a list of everything from them and then start adding it into your costs. You may very well find that 12% & 2 point loan is actually cheaper than a 7% & 1 point loan. On the surface, you would never suspect it.

Back to your original question... Should you use HM for your first flip? The answer is maybe. Only you can truly answer that question. You have to look at all available sources of funds. Here's a brief list of questions you should be exploring...

1.Do you have any cash? 

2. Should you use it? 

3. What's the benefits to using your own money? 

4. What are the draw backs of using your own funds?

5. Do I qualify for a bank loan?

6. Do I qualify for a Hard Money loan?

7. How much profit is in the deal? Not just cash, but what are the percentages. Margins are percentage based. What's your margin?

8. Can the property support higher costs and still maintain a good healthy margin for you?

As you consider all of these things... Keep this in mind as well. There is a big difference between a direct cost to you and making a little less when you sell. Direct costs come out of your personal pocket. Making a little less is a lot safer and better position to be in. If the property can support the higher costs of the best HML you get, go for it. If it doesn't, I would suggest it's not as good of a deal as you probably think it is.

Anyway, just my 2 cents.

Good luck!

@Rohme Williams,

Unfortunately, the lending space is filled with a lot of pretender lenders. Most are easy to spot though. Their offers are usually too good to be true. 

Small upfront fees aren't bad. But, those fees should only be for covering costs in case you don't qualify. IMO, the only acceptable fees are application fees (to cover the credit pull) and the appraisal. Excessive upfront fees are dangerous for the borrower. Usually the less than reputable lenders have the big upfront fees. Fees are a big profit center for many lenders. Find lenders who are reasonable and you'll be fine.

Good luck.

@Robert Tinker, The best tool that I've found out there for doing estimates as a rehabber (I'm not just a lender, my business partner and I are investors as well) is Rehab Estimator Pro (https://www.rehabestimatorpro.com/ - This is not an affiliate link - I don;t get anything for referring you). The guy that developed this software is also from Wisconsin.

We use it both when we are flipping a house and for when a borrower asks for a loan. I've found it to be accurate within 1-2% of actual. Matt spent a lot of time micro-analyzing rehab numbers to get it this accurate. He also put options into the software so that if you find that your area is a little different, you can adjust the formulas up or down.

Good luck. I hope this helps.