All Forum Posts by: Josh H.

We were planning on selling it but are leaning towards keeping it and using the BRRRR method. We have excellent credit. We're looking to get out as much cash as possible, is 80% possible? There isn't a lease on the property yet but I'm sure there would be quickly because everything is new including all new plumbing, electrical and HVAC.

3 Votes

Baltimore, Maryland

Quote from @Jeff S.:

The entire, “What should I call myself as a lender?” has been around forever and solves nothing. More concerning, @Josh H., is you’re splitting your profit 50/50 with a partner and suggesting hard money is for suckers?? Do you run the numbers for each deal? Do you really know the cost of your financing options? Hmmm.

We run a detailed evaluation of each scenario and find that most house flippers only estimate their final profit and don't know all their true costs. It's easy to show that for a typical Private/HML loan, where rates are in the 11% /2pt ballpark, the P/HML will take approximately 25% to 33% of the profit. You're freely giving away 50%. This could be worth it if your investor were adding value beyond providing the money. You indicate, however, “We do all of the work and management…,” so I have my doubts.

You’re also making assumptions about service with little apparent basis. P/HMLs run the gamut from disinterested brokers who might arrange a loan for a fee and then disappear, to the giant mega P/HMLs that are more concerned about keeping their Wall Street investors happy, to smaller lenders who lend their own money and actually care that you make a profit. All provide a service, but it sounds like you’re looking for the last type.

The website you referenced is nothing more than a referral site -- and a bad one at that. (Most of the links don't work.) Like that on BP, Scotsman Guide, AAPL, CMA, NPLA, and so on, referral sites like these are a dime a dozen. You're not looking for a list, are you? Face-to-face is the way to meet small service-based lenders, Josh, and real estate clubs are the most efficient way to find them.

I know everyone gets tired of hearing it but lending really is a business based on relationships. If you must squeeze the last tenth of a percent out of a loan to make money, which you don't, I suggest you need better deals. If you’re looking for service over the course of a loan, for example, if you have a problem and need an accommodation, then you need someone who cares. Smaller lenders like us (and @Jay Hinrichs), who lend their own money professionally, are your best bet. You won’t find these on a referral site. Nor will these people care what you call them.

Good points. Thank you for the reply. To clarify, I wasn't saying that hard money is for suckers, I was asking - but the forum wouldn't let me put a question mark in the post title for some reason.

0 Votes

Fairfax, Virginia

Quote from @Jesse Tomlin:

Quote from @Josh H.:

Good Morning BP Community,

Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

Hi Josh,

I'm interested in structuring a deal with an investor much like you mentioned in your post. Do you split the profits 50/50 or does it vary deal to deal? I've never entered into a real estate partnership and would like to make it a win win for everyone involved. Thanks in advance.

Hi Jesse,

Yes, that is the way we structure deals with our capital partners, the profit is split 50/50 for every deal. Everything is spelled out in the LLC operating agreement as a 50/50 split there, that way no one gets greedy and tries to get creative at the end.

2 Votes

Fairfax, Virginia

Quote from @Jay Hinrichs:

PS since I work as a capital partner just like the guy your using now. there is huge benefits compared to borrowing from HML or PML.. the benefits are basically if the deals start to wobble you have much more flexibility to work them out with your capital partner then U do a HML PML who wont show you the same flexibility.. mainly because they cant they are tagging their wholesale lines and there are rules for using them that your simply not aware of as the end buyer but will become very aware of if a deal cant be paid as agreed for any reason. And also not a dig on Brokers but Brokers can basically offer zero help in most instances if your having issues.. they get paid to close the loan then are out of the picture they have no authority to do workouts or modify terms etc U would be working with the actual lender then..

Thank you for your very thoughtful and informative responses, Jay. I really appreciate it. I see your point. I hadn't hoped for rates of 5% from a wealthy doctor, but would love to shave anything that I can off of the cost to do business. We work hard cut costs as much as possible, everywhere that we can. I would like to work with more private money lenders because the costs can be a little lower, when there is not as much overhead involved, such as their office space, HR person or department, payroll processing, etc. I just need to find more private money lenders to work with.

0 Votes

Fairfax, Virginia

Good Morning BP Community,

Is Hard Money really for suckers?

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

4 Votes

Fairfax, Virginia

Quote from @Matthew Paul:

So you have a team in place , subcontractors that do the work , you have done 30 houses , so you know the construction game . No houses to flip , no big deal . You are basically a General contractor as I write this . Get your Home improvement licenses in the DMV areas . Become a contractor . You wont have to touch your funds , the customers money funds the projects .

You will make more as a contractor with minimal risk ,

I agree, @Matthew Paul - this is a great way to supplement income and diversify. I appreciate you breaking down things like you did. I was already contemplating doing this and you convinced me to move forward with it. I am applying for a general contractor's license in the state of Maryland and have bought the course and traning materials as well. Thank you.

0 Votes

I agree, this is a good tactic. We are doing this with a couple of properties now.

0 Votes

Quote from @Corby Goade:

Quote from @Josh H.:

Hello BiggerPockets Community,

I am in a little bit of a situation and looking for help. My wife and I have been flipping homes for the last three years, we have flipped 30 houses with all of them being profitable. My wife quit her job to focus on Real Estate about 1.5 years ago, due to no longer being able to work in the corporate world. I have been helping her manage the contractors on the weekends, and going out to the properties to do some work as they were being prepared to sell.

A couple of months ago, I got laid off from my job that paid $100K+ per year. We figured that we could sustain and maintain our lifestyle by doubling down efforts on flipping - especially since we have a little more than a year's worth of money, if we did no more flips in that time. However, we have worked very hard to build that capital and don't want to spend through it. We need more flips!

The problem is we have found it very hard to find good flips over the last few months in the Washington DC, VA and MD area. With construction cost, material cost and the houses (even in bad condition) cost an amount that the flips are not profitable. We are checking off market sources (such as Facebook groups) as well as the MLS. The deals are just so hard to come by, and they get bid up to where they are not profitable.

How can we find more houses to flip?

Any advice would be very appreciated.

The truth is that flipping is hard, it's risky and it's expensive. You aren't having a unique experience. If it were easy to find deals and cheap to rehab, everyone would be doing it.

Networking and going in 110% is the way. Get out and talk to everyone you know- realtor's, wholesalers, lenders, go to meetups, shake hands, etc. 95% of the deals people do come from the connections they make with others in their market.

Corby,

Very true and good advice. Thank you, I will do that as well. I know the deals are out there, there may be less of them but they are out there to be had. Just have to keep looking and look in new ways if needed.

1 Vote

Quote from @Bob Stevens:

Quote from @Josh H.:

Quote from @Bob Stevens:

Quote from @Josh H.:

Hello BiggerPockets Community,

How can we find more houses to flip?

Any advice would be very appreciated.

Buy rentals, flipping is a job a good one but a job. BIGGEST mistake I made (cost me millions) was not keeping 50 more of the 500 or so I flipped, 50 would be about 40K NET INCOME a month, and have a value of about 5.5 mill, what more do you need, NOTHING!! Take the 500ksih you have, you can buy about 10 props for about 100kish, with 1300ish in rent, Use seller financing, and call it a day. Or find a flip make you, 100kish, or so, then have to do it again, and again. Like I said a job.

All the best

Hi Bob,

Thank you for the advice. What you said really resonates with me, as it is a common theme that I have now heard a few flippers say. I will certainly be holding onto some properties as long term rentals. We have a beachfront STR that is doing very well, and are looking to purchase more. Thank you again for the advice, I will make sure to keep some of them.

Best,

Josh

Where is your beachfront? I assume FL, where ?

All the best

Bob,

It is in the Outer Banks, on Hatteras Island. It's a 5 bedroom, 4 bathroom, 2500 square feet home that sleeps up to 14. It is doing pretty well. It was $1,000,000 to purchase with 20% down it but it is cashflowing and will break even after the initial investment within a couple of years.

1 Vote

Quote from @Jack Seiden:

Quote from @Josh H.:

Hello BiggerPockets Community,

How can we find more houses to flip?

Any advice would be very appreciated.

As someone in a similar place, flipping is dead atm, because I’m a crazy person I look at 13 counties every single day, look at wholesale off market stuff, I hate to say this but the margins just aren’t there, you don’t make the market, the market decides these things for you. I’d frankly just accept where we are at and wait it out and in the interm go do something else with your time.

Yeah it sucks, we are doing less flips because we are being forced to - the deals just are not there right now. However, as you mentioned, I should find something else to do with my time, I am - we just started a tear down and rebuild project and are going to start another one soon. We will keep looking for flips though, some will pop up in the coming months - but I will stay busy in the meantime!

0 Votes

All Forum Posts by: Josh H.

Josh H. has started 10 posts and replied 50 times.

Post: Is 80% LTV Cash Out possible on a new BRRRR rental?

Post: Private Money (Hard Money is for Suckers)

Post: Private Money (Hard Money is for Suckers)

Post: Private Money (Hard Money is for Suckers)

Post: Private Money (Hard Money is for Suckers)

Post: How to Find More Homes to Fix & Flip?

Post: How to Find More Homes to Fix & Flip?

Post: How to Find More Homes to Fix & Flip?

Post: How to Find More Homes to Fix & Flip?

Post: How to Find More Homes to Fix & Flip?