All Forum Posts by: James Kandasamy

@Account Closed Completely agree with you on why we can use Hard money for leverage. I do that all the time. With regards to the other fee structures, the point of the post is to bringup up the missing print aka what some of them HML don't tell you or advertise.

james

 I don't think we have to negotiate to get the lender B deal. There were some who just offered as the lender B way.

For newbie's, just ask the question on how a HML charge It for this scenario and you will be able to make a better judgement on which HML to go with.

James

BPers,

                        Not all hard money lenders cost structures are the same. From my experience of working with 3 different hard money lenders , I have discovered a key hidden cost structure that only a few would realize and not advertised. Most of the time, many investors both newbies and seasoned does not realize this until you work with different hard money lenders and discover inconsistencies among them. If you are not aware of this cost, it can cost you a few thousands of dollars in your real estate endeavors. It’s important for you to know this unadvertised charges as part of your hard money lenders selection criteria

                        The cost that I am talking about is the interest charges to "pre-drawn" rehab funds. Assume that you buying a 50k house with 30K rehab cost. Your total hard money in the deal is 80K.  The criteria that almost all hard money lenders requires is that the draws are made after the work is completed.  On the day you close, you hard money lending loan is 50K and the remaining 30K will be made is few draw cycles as the rehab progresses.Lets assume your rehab requires a period of 2 months with 50% (draw of 30K / 2 = 15K) project completion on 1st month and another 50% (draw of 30K / 2 = 15K) on the 2nd month. What I found out is that there are two type of lenders that charges interest differently.

• Lender A would charge interest on total purchase + rehab amount from day 1 after closing till you get out of their financing.
• Lender B  would charge interested on purchase amount on day 1  but would adjust the loan amount interest based on draws amount.  To clarify Lender B would charge 50K+ 15K ( 30k divide by 2) at the end 1st month and 50K + 30K on second month.

 If you have gone with the lender A, you would have paid interest on 30K for 2 months even without having the money work for you. If a lender charges 14% interest, that would be a $700 extra interest that you have paid them for a money that you have not used during rehab phase.

Imagine if its higher interest or the rehab spans across 3-6 months or the rehab cost is 30-50K …. It can be thousands of dollars.  

Why we should pay that if the money is not drawn out ?

James

@Troy Sheets Here is the link  

Keep in mind when you click on the link that investors always look for deals at the cheapest price with highest perceived value...

http://www.amazon.com/Outdoor-Security-Camera-Blin...

James

@Rosalina Brenda Berk Brenda ,

The percentage depends on the investor. There are many investors who buy at 100% and still be happy with just investing in rental for the some cash flow purposes . The lower the % the more equity you will capture on top of. Cash flow. In Austin it's common to buy from wholesalers for more than 80% ARV.. Of course the lower % it's going to be harder to find the deals.

James

@Troy Sheets  Hi Troy, Thanks for asking. I have started using the "real" camera in all the rehabs that i do to ensure that it keep the property safe. You can buy the "real" camera in amazon for $7.2 per piece. Imagine spending $7.2  vs. spending 4-5K due to vandalism or stolen copper wire...

@Rosalina Brenda Berk Brenda, The numbers are your yardstick on the deal. For example the ARV ( after repair value) is 131K. I purchased it at 47K, rehab around 35K. So total money into this is 82K. So 82/131 is 62%. That's a smoking hot deal. In general if you can get a deal around 70% of ARV, that's a super deal in this market.

The double close is a strategy that you buy a house with hard money lender/Private lender to purchase the house and rehab them. After the rehab is done (few months for rehab), then you refi the loan to conventional hard money lender at prime rate. If you follow this strategy, any deals that is below 66% of ARV would means that you have a zero cash out of pocket. This is an example of zero money down investing by creative financing.

james

I am surprised that nobody ask about the camera !. That is a cheap strategy to secure from getting vandalize during rehab.

@Joel Owens  Hi Joel,

Isn't that what "wholetailing'  is about. I think @Michael Quarles  does this all the time and talk about it in his last podcast.

James

@Mary B. My usual rule for the trees are to trim it off from the roof. everything else is more trimming for cosmetics purposes. I usually never plan to trim it down completely unless i can find a strong reason to do so. I think its a blessing for the Texas weather.

James

@Frankie Woods 

@Frankie Woods

@Tina Scarisbrick @Jayagowri Deenadayalan @Craig Harpestad @Account Closed 

For some reasons the mentions are not working right, so i have to do this again with the mentions become real website links.

James