All Forum Posts by: Juan F Alvarez

Hey Jonathan! Since you work with rehabbers, you might need some funds at some point, or even if you want to work on your own projects. 
I am a loan officer for a direct Private Lender (RBI Private Lending), specializing in Fix & Flips and New Construction, so I can help in the future, if you want send me a connection request and perhaps I can help you once you find a project

Moises, if you are planning to make it a business and you will be doing it frequently you will not be able to use traditional financing to scale up, which is the reason you have to go with asset based (hard money) lending, where we are not going to look at your debt to income ratio, like traditional banks do. 
For the most part, the good deals are going to be found with wholesalers and usually cash or hard money, since they want quick closings. A hard money lender will take about 7-10 business days to close on a loan, which will help you buy properties below market. In flipping you will make your money when you buy the property, therefore quick access to funds is crucial, and that's why it's very difficult to flip a traditional MLS based purchase. You will usually not get a good enough deal, and you will be competing in the purchase against retail buyers, especially in today's market.

Hard money lenders, since we are asset based, will go based on the asset - we will look at your credit and experience for terms - but we don't go into your personal accounts and we don't care how many properties you are flipping at one time, or how many loans you have open. We can provide quick quotes which serve as proof of funds when purchasing from a wholesaler, and can close quickly. 
I'll be happy to help if you'd like to connect, send me a connection request and I can guide you thru the process

The terms are used interchangeably for the most part, it just depends on the context. 

Some people do refer to private money as friends and family, but in reality Private Money refers to "not banks". It can also be a professional company that uses private money to do loans, and gets investors, as opposed to government secured loans. For example, the company I work for is called RBI Private Lending, and we do hard money loans. 
I think private money is more general since you are talking about a variety of products, which can also include longer term loans backed by private/investors' money. Hard money refers to strictly shorter term interest only loans, and those come also from private money / investors. 

@Jace Perry Hi Jace, I will be very happy to provide you with a term sheet if you have a deal you're working on. We are direct lenders for fix & flips, new construction, and bridge loans. If you'd like, DM me, I'll be happy to look at what you are working on to see if we can help

We are a direct hard money lender that does loans for new construction. I'm interested, can you DM me some details?

Hi, we are a direct hard money lender. Is this a bridge or a fix & flip?

DM details if you are still looking for funding. Experience is not needed, but it helps the terms if he/she has it. 620+ FICO

The purpose of hard money is to have access to properties that otherwise you wouldn't have access to. 

It is the equivalent to buying a property cash, and its main purpose is exactly that, to not miss out on a great deal, because access to funds. 

Yes, the interest rates are higher, but they are to be carried over a short term - 1 to 2 years max, and you'd be making interest only payments, which will allow to keep payments lower while the property starts making income for a refinance or gets sold as a flip. 

Additionally, although many lenders do look at your personal credit to see if you are a decent guy that pays his bills, it will be a loan made out to an LLC not to you and therefore it wouldn't show on your credit. Making it great to scale up, since a hard money lender is only concerned about the property and not your personal debt to income like a traditional bank would. This allows you to have many loans at the same time to scale up your operation.

So it has enormous advantages for sure, but it is imperative that you know how to identify a good deal and have a clear exit strategy and a timeline before you jump in. You need to have your team lined up ready to do the work the house needs asap. 

Look for companies that don't charge a prepayment penalty. That way if you sell the place quicker than you anticipated you can pay the loan off without any financial  consequences. 

Also, a good lender won't let you go into a bad deal. And although some companies like ours will lend to inexperienced flippers, it does help the terms if it's someone that has some experience, because the person is perceived as less risky once they have a few projects under their belt. 

BRRR is good as long as you find a great deal. As an agent you probably have very good experience about what a great deal looks like.

Now on your first couple of deals, you want to have time to address issues, and there will be a learning curve on what need to get done and how to become more efficient at it. You want to have time to ask questions and get answer from your support network. For the most part the process of looking for a property and buying it is similar whether it's a $50k property or a $2 million property.  

The best way to find a good deal is to buy them cash, specially in today's market. Not sure if you have a 401k, but sometimes you can take loans against it - just gotta make sure it really is a good deal that you are getting.

The equivalent to buy them cash would be to use hard money which works if you are completely sure you are finding a good deal. Just make sure you give yourself extra time. You will pay a little higher interest, but since you will be slow to start out while you learn, you want to make sure you give yourself time. 

Have an exit strategy before you buy the property. Know what the plan is. Are you going to sell it for a flip, or hold and refinance? That depends on the property. As a realtor you probably have a good feeling about what's good for sale, and what's good for rent in your area.

Start out small, get familiar with the process. Look for properties in areas you are familiar with. If you decide to borrow, make sure you find a lender that will walk with you through the process and is not there for a quick commission. 

You need a team of:

General contractor, property inspector, trustworthy lender (they will have appraisers, and title company), property manager (make sure is large enough that if the person that manages it gets sick someone else will cover), insurance agent, and a real estate attorney in case you need a consultation, and most importantly an accountant with a lot of real estate  experience (this will be a major ally as you grow your business)

Line up your team even before you look for the property.

Go to networking events. You may even find someone else to go in with you on your first property, perhaps another first time investor who also has $20k.

Flipping is still ok to start scaling up, since you don't want to have all your money tied up to one property. Yes, capital gains are high taxes. But you can talk to an accountant about setting your business up under a corporation, and doing 1031 Exchanges. I am not an expert in that area so I don't want to give the wrong advice. 

But the main take away is work in an area where you are sure the deal that you are getting is a good one. Give yourself enough time. And have your team/support network lined up before going into a deal 

I am also in Miami, it is getting expensive, but it's because of high demand. 
One thing you could do is look for a fixer upper. If you're going to live in it you could look at Fannie Mae propeerties that will get approved for an FHA loan with 3% down. They usually post them in www.homepath.com. The requirement is that you live in it for 12 months if I'm not mistaken. 

Another option is going to be looking for off market deals, but they are going to want all cash or hard money loan, which you could do for a year and then refinance it once the property passes inspections for a long term loan. You can find properties like that in www.investorlift.com

I would start with a market that is accessible (Miami Metro, Naples, LeHigh, Delray, Boynton, Palm Beach etc, because problems WILL arise, and since you are just beginning you want to be involved to learn and build a team that helps you meet with them face to face.  

Also don't aim to expensive properties. You said it, Miami is expensive right now. That means is a huge demand for affordable housing. Look into working class/blue collar neighborhoods. 

Also, lots of baby boomers moving to Florida. Not all of them have millions to buy a house. And most of them are not coming to Miami but are coming to peaceful towns.