All Forum Posts by: Jeff Cichocki

@Jordan Kelly, You need to find a lender that specializes in dealing with investment properties. There are programs available outside the banks that don't have employment verification of DTI requirements. They will look at the deal, your credit score and liquid assets. It's almost impossible to find a lender that will do 100% financing, but 95% of purchase and 100% of rehab on flips is pretty common; 80-85% for rentals is also very common. If you've got that covered, There's a program out there for you.

Feel free to send me a DM if you need any other information about what's out there. Happy to help.

Good luck!

@Donnie M.,

There are a lot of long term products offered out there that are below the 10% interest you're referring to. They are credit score, experience and liquid asset driven, but they are available. Many of these products can go as low as 5%. These programs are available through some HML's. Many of us that offer HML's don't just offer Flip loans at higher rates & fees. Many of us offer these types of loans to help our BRRRR clients on the backside of the rehab loan get out from under it. It's a great combination of loan structures when used right. But, that doesn't mean the LT loan has to have a HML first. You can go straight into them.

Good luck. I hope this helps.

@Matt Rozzell,

This may sound like an odd answer since I'm a lender, but..

I would tell you to find a few to work with. We're not all the same. We may be good for one type of deal and not another. It's best to find out what each lenders niche is. No one can be good at everything (no matter what we tell you). We all want your business, but we should be a good fit for you and your project. You may find a guy or gal that you really like to work with at a lenders office, but they may not have the best product for your project. You need to find both if you want to build a good relationship and get good loans. You need to find a lender who will act like they are your financial partner and help you work towards your success.

Anyway, that's just my two cents.

Good luck!

@Magesh R.,

There are lenders who will lend all over the country. There are programs available for wholesaling (transactional funding), fix n' flip, BRRRR (bridge), long term holds, etc. Rates and terms vary widely based on credit score, quality of the property, appraisals, liquid cash, etc. The better you look as a borrower, the better the loan program you can find.

Get to know the lenders. Get to know the programs available. There is no such thing as a perfect lender for every deal. Having relationships with more than one will enable you to take down more deals.

Good luck!

@Christa S Rickard, 

I wish i could give you a straight answer, but it all depends. A 10% interest rate isn't bad if the deal still works for you. If the deal doesn't work with it, then it's not a good rate. However, it could also be something else that's causing the deal to require a higher rate...

1. You could be overpaying. When you buy, you really want to buy something that needs a little bit of TLC so you can buy or build equity in it. Buying at full retail is rarely a good idea, especially for someone with little to no experience.

2. It could be their perceived comfort and trust in you. They may thing that you're an honest person, but if they unsure as to whether or not you can really pull this off, they may feel like a higher rate is justified because of their perceived risk.

3. They may be a very experienced investor themselves. They may understand that lending money, especially seller finance, is a very valuable proposition to you. They may want more just because they can and know that.

There are a lot of other possibilities too. The trick when buying to is to find negotiate when you are talking to the seller. But... What is negotiating?

True negotiating is finding out what the seller wants/needs and finding a way to give it to them in a way that works for you. Is that what you're did with the seller? I'm not sure. But, I see it a lot where the buyer just gives in to what the seller asks because they don't understand their role as the buyer/negotiator in the deal. I also see a lot of investors who want a deal so bad, they cave in on things they shouldn't.

Anyway, just some ideas that are rolling around in my head (scary place by the way).

Good luck!

@Dave E., 

Generally speaking, I don't worry about it that much. We use them when we buy all the time. The lenders we use for our own purchases (private lenders) trust us and they don't worry either. Unfortunately, sometimes my underlying lenders don't like it when it's someone else's loan I'm using their money to fund. If it's national lender I'm brokering for, it's another it depends. It's a very misunderstood entity and makes people who don't understand them nervous.

In our area, I've yet to find an attorney or title company that knows what to do with them. Any time an attorney or title company starts balking, lenders get nervous. We try really hard to work with the same local title companies. We've trained them on how to deal with them.

Even as a lender, there are many things I still don't understand in this industry. There are lots of inconsistencies between lenders and brokers. There's pro's and con's to it all. The biggest pro is that there's a loan program out there for just about every situation imaginable; the biggest con is trying to find it when you're deal isn't the standard run of the mill deal. 

What @George Skidis said above is correct. Regardless of what your reasoning for doing something is, you need to be transparent with your lender. Even when things are allowed, when they happen after closing and the lender wasn't informed this would be happening, they feel like someone is trying to pull a fast one. It never ends well when your financial partner in the deal starts to doubt your intentions. Whether or not it's intended, the perception of deception is a relationship killer.

As for whether or not it trips the due on sale clause, it depends on what's really going on. If the lender can't tell and the borrower is being evasive (even if it's for what the borrower perceives is a good reason), the lender may call it due. Most borrowers don't realize this, but almost every commercial type loan out there (all investment loans, even from private individuals) are commercial in nature. Almost every good commercial loan paperwork has a call provision. It trumps the du on sale clause. The call provision allows a lender to call the loan due at any time for any reason without just cause. Now, no one uses this clause unless they feel threatened in the deal, but it's there. The call provision is the one that people should be more worried about than the due on sale clause.

Residential mortgages that investors take over sub-to are more likely to trip a due on sale clause. residential mortgages don't have a call provision. Because of consumer protection laws, it's not allowed. Using trusts in deceptive ways can absolutely cause the bank to use it and call the note due. More often than not, as long as things look clean and the payments are being made, the banks will leave it alone.

Most guru's teach you to use land trusts in fraudulent ways (actually, I don't know of any that don't teach this way). The only time a property is allowed to be put into a trust and not be in violation of the due on sale clause is if it it's for estate planning purposes. Putting it in a trust to hide the sale from the bank is NOT estate planning. It is potentially mortgage fraud. I haven't heard of anyone going to jail over this, but I believe that at some point someone will.

Now with all that said... Investing is a great tool to better your life with. It can be extremely profitable and ti can be extremely rewarding to help sellers out of tough spots. Learn what you can so that you run a clean business. But get out there are do business. Go help some people and make some money.

Good luck!

@Carson P., 

I agree with @Nathan Gesner. Don't take on someone else's problems. However, with that said, it's that bad of an idea to let them stay for a few months as long as they are paying tenants. It does help you financially while you get the renovations done to the other side. However, keep in mind, your new tenant may not want to move in knowing the other tenant is not good (they almost always can tell).

Bottom line, it's a business decision for you. If it makes sense to you and your comfortable with your plan, go for it. It;s your business and everything we say is just our opinions.

Good luck! Hope to see at one of the upcoming REIA meetings in GB.

@Sydney Williams, don't forget to look up the REIA's and clubs in your area as well. There are usually multiple types of groups in your area to pick from. Each type will attract different types of investors. Pick the the groups that best match your goals.

Good Luck.

@Louis Colavecchio,

If the property needs rehab/reno, you're better off taking out a Hard Money or Private Money loan. While it's difficult to get a loan without putting something into it, it is easier if you can find a private lender. They're typically not professional lenders and will be a bit more flexible.

After you get the rehab done, refinance into a LT loan. There are many options out there that would allow you to even take cash out of the property if needed. If you put some of your own cash in, this is a great way to get it back out.

Good luck!

@C-Dell J.,

The right answer is the one that works best for you and the deal. Conventional and private money will be the cheapest. Hard Money will be anywhere from moderate to expensive. Interest rates, terms, fees, etc will vary based on the quality of the deal, your credit score, liquid assets and the specialty of the lender. No one lender is perfect or right for every deal. All forms of lending should be considered. If you discount a particular form of lending, you will miss out on deals that would have made sense with that type of loan. 

While I am a lender, I am also an investor. As an investor, I consider every type of lending option available to me at the time I am looking to buy it. I would hate to lose a deal because I listened to someone who said it was too expensive. The cost of the money is relative to the deal. If the deal will support it and you'll still make what you want, how is it to expensive? Especially if you would have lost the deal without it.

Something to consider when you hear how HM is too expensive.

Good luck!