All Forum Posts by: Account Closed

Cash flow is the number 1 name of the game in real estate investing. Leverage / OPM is a close 2nd. 

So B would be the option for me. 

Hey Justin congratulations on taking steps and getting out in the REI world and doing something. Taking some action alone is more than many people will ever do in this business.

I think joining BP is a great first step. You'll find a ton of useful and relevant information not to mention all of the contacts too. 

I would suggest you join a local real estate investor group in your immediate area and go to meetings, network, find out what other investors are doing there. Real estate markets do vary so what is working in one locale may not be the same as another. Learning firsthand from other investor experiences can be incredibly valuable for your own education.

As far as financing I personally got started using hard money lenders. I didn't have a lot of money out of the gate so for me using a hml made sense. This was about 10 years ago or so and I just continued to gradually build off my first investment. I know there are a lot of hmls in the CA area if that is a route you end up considering.

Good luck! 

Personally I don't spend time on open houses for my rentals. I market online using free or cheap sources such as Craigslist.org, Postlets.com, and other local sites. The online marketing generally creates leads who initiate contact via the internet (email) or phone. From there I would schedule an appointment to meet the prospect at the property. In my experience open houses are obsolete, maybe it's a location thing. I find more than 70% of my tenants are finding my rentals through my online marketing. 

If you do schedule showings with prospects always have the prospect call or email the day of to confirm the appointment. This is a time saver for sure.

Back to your question about refreshments, I think it's fine to offer. Hopefully you get some prospects to show up.

If you are looking for a quicker answer to your loan request, take the time needed to put together a complete submission to the lender, including all of the information the lender has asked for. Avoid "piece mailing". 

Doing so will ultimately get you a quicker answer to your loan request.

Many times the investor “piece mails” information to the lender. It is difficult to try and piece together all of the information from a variety of sources including emails or phone messages. 

It’s always best to submit a complete loan request including all of the information the lender has asked for. It will not save any time nor will the borrower receive a quicker response to submit a few pieces of the loan while waiting on the rest of the information.

Stay tuned for more tips on working with hard money lenders. 

Do you have tips for working with hard money lenders? 

Or 

Do you have any questions for working with hard money lenders? 

@Trevis Kelley

Hi, Trevis, 

I would be happy to take a look. I was unable to get the map link to work. Could you provide me with the address or private message me the address so that I can google map it? 

Thanks, 

JJ 

In the Kansas City Investor Funding Hard Money Lenders Blog, we touched on some of the differences between hard money loans and traditional loans in an article we published previously titled The Benefits of Working With Hard Money Lenders When Investing in Real Estate. It outlined some of the advantages that companies like Kansas City Investor Funding LLC can offer in comparison to conventional banks and lenders.

Now we'll provide a case study to help illustrate some of the additional financial benefits that one might experience if they were to use a hard money loan to fund the purchase and rehab of an investment or commercial property. This example was originally inspired by a post made by Kim Tucker, the Chief Operating Officer for the Mid-America Association of Real Estate Investors (Visit MAREI.org to learn more). You can find our company in the MAREI business directory.

This image highlights some of the financial benefits one might experience from using a hard money loan to fund the purchase and rehab of an investment or commercial property.

Case Study: Hard Money Loans vs Traditional Financing

Here

It may sound strange, but keep your LTVs as low as reasonably possible. Doing so not only helps you get a hard money loan, it’s usually going to be a better buy or investment for you too. 

Many investors seek hard money loans above the LTV the lender is offering. One reason for this might be because the investor is wanting to wrap the closing costs, loan costs, or other fees into the loan. Another reason might be the subject property purchase price and rehab costs may exceed the lender's LTV parameters.

Also, don't try to "fit" the numbers into the LTV parameters. This occurs when the borrower won't increase the scope of work because doing so will put the borrower over the LTV limit with the lender and the borrower is trying to maintain the lowest LTV possible in order to avoid brining any money to closing. This will not work because the lender will eventually determine the scope of work is inadequate for the loan situation.

Anticipate the need for some money at closing. Don't expect to be able to wrap all of the closing costs and fees into the loan. Even with a good LTV ratio, the lender is almost always going to ask for some money from the borrower at closing. If you are looking to do a deal without putting any money into it you are probably wasting your time and efforts, at least in working with a hard money lender.

99.9 out of 100 times the investor will need to bring some money to closing.

It’s almost unheard of in today’s real estate market for a buyer to be able to borrow all of the money needed and also be able to wrap in all of the loan costs and fees without bringing any money to closing or having any “skin in the game”.

Most lenders require the borrower to have some money into the loan. Whether it’s paying for closing costs, loan fees, or making the up difference in the LTV, a borrower should always anticipate the need for some money at closing.

By following these tips and avoiding these mistakes when working with a hard money lender it will inevitably result in a much smoother and easier transaction for everyone. 

Thanks, John. Great input. It's extremely important to have clear terms for a deal before proceeding into close, as every hard money lender structures fees and costs a little differently. 

Here's another tip for working with hard money lenders. 

Understand all numbers are going to be estimates until all of the variables are completed and final numbers are calculated. The hard money lender might be able to give you an idea of the amount of money needed for closing but it’s only going to be an estimate. You should always expect to bring some money to closing.

Even though hard money loans don’t usually require a set down payment, it is almost unheard of where the investor borrower will get 100% financing with absolutely no money into the deal. Investor borrowers should always anticipate and expect to have some money into the deal.

Final numbers are determined once the appraisal is received, the scope of work figures (when applicable) are finished, and closing costs and fees are finalized. At this point a specific dollar figure can be given to the borrower. Until this point of the process all numbers are going to be estimates.