All Forum Posts by: Kerry Boyle

@Stord Jacob What happens between 6 months and 3 years? Is it 12% interest the whole way through?

That is odd, usually a 6-month term balloons at the end of 6 months. 

Are they lending rehab as well or just 60% of purchase @ 12/4? 

Quick Example: Use HML to fund purchase and rehab @ 85% of purchase, 100% of rehab.

Your loan would be $311,250. Let's use a conservative 12% interest and 4 points and say 6 months til your exit.

Your out-of-pocket is:
$48,750 - down payment.

$31,125 - Points and 6 months of payments.

Add in your title, transfer taxes, and insurance. You are somewhere between $85k-$95k out of pocket.

If you can complete the project and refinance out of the HML (without taking cash-out) within those 6 months you can save on some of that interest only payments. Your new loan would be for $311,250 - which is somewhere between $1500-$1900 depending on your interest rate.

That would be a good deal in my book. What you would be concerned about in the hard-money lender world is... lenders typically only fund 65-75% of the ARV. Your ARV would have to be from 415k-480k or above.

To get cash-out, it is typically said that you would have to hold for at least 6 months. Just adds a bit more financing expenditures (I/O payments are $3,112.50 @ 12%).

@Dmitriy Fomichenko & @Rick Pozos

Regarding lending directly to another investor and getting 12-15% returns on your SDIRA, I'd like to ask the following:

I'll consider two examples:
A) Have 100k in a 401k @ 10% YoY.

B) Have 100k in a SDIRA lending @ 12%/year - all costs borne by borrower. Let's just assume a 5 year balloon note with interest-only payments.

After year 1, I have $110,000 in my 401k. $12,000 in my SDIRA and a loan for $100,000.

After year 2, I have $121,000 in my 401k. $24,000 in my SDIRA and a loan for $100,000.

After year 3, I have $133,100 in my 401k. $36,000 in my SDIRA and a loan for $100,000.

After year 4, I have $146,410 in my 401k. $48,000 in my SDIRA and a loan for $100,000.

After year 5, I have $161,051 in my 401k. $160,000 in my SDIRA.

Any downtime would further hurt your SDIRA rate of return. What do you do to combat the lack of compounding that happens with a SDIRA? It is obviously better to earn 12% interest than 10%, but is there any way to do long term loans that exceed a compounding 401k?

Get a quote from a bunch of hard money lenders, many can give you verbal quotes without running your credit.

Try to beat their rates with your potential PML. If you can't get the money, you at least have fall back options.

References from brokers they closed deals with and title companies where they had closings. I haven't heard of them, but there are so many it isn't atypical.

/edit They are brokers, says so on their website. They also say loans as low as 3% right under a title of hard money loans - doesn't exist. Broker's may have advantages depending on how much time you want to spend on a deal, but you pay more for their services.

Just note that on a 6 month loan a 12% interest rate vs a 15% interest rate is only $1500 more. 5 points vs 3 points is only $2000 more. Nothing that is going to kill the deal, but if you feel like you can find something better on your own you can save money on points - brokers usually don't make anything from interest rate hikes.

$5,000 in 3rd party closing costs (I don't understand)

Sounds like title, insurance, and transfer taxes. Is it just an estimated 3rd party closing costs? 3rd party means the lender is not charging you that. We also put 3rd party closing costs (estimated) in our conditional approvals. Just confirm with your LO that it is title, insurance, and transfer taxes - I would imagine you did this already and you are just confirming with us.

/edit If you still are unsure, ask for a redacted copy of a settlement they have completed in the past 30 days or so. 

9.5% interest and 1.5 points with a $1500 processing fee is still really really good for your first flip - so I would still be a bit scrupulous in ensuring they are a real lender.

We call our expensive loans portfolio loans. They have less in terms of guidelines, but more in terms of rate/points. I don't think "portfolio" is the right word for what you are after. If you want to pay less than 9% on the east coast AND close with a wholesaler, you probably want a private money lender.

To answer your original question of the thread: No, wholesale deals do not have to be cash. Contingencies may be allowed depending on the wholesaler. 

We have closed several deals with assignments and even paid wholesalers on the HUD, when it makes sense. I don't know of a wholesaler who would allow traditional financing. You would have to sneak it in and probably have the cash to close in the event your traditional lender didn't have enough time to close. "This contract may be financed or purchased with cash, however, there is no financing contingency." is your strongest play.

Solid strategy in finding lenders, don't forget to leverage what you find here on BP.

Questions that I think are valuable to ask:

• How do you structure deals, LTV/Rehab financing, ARV-LTV restrictions? Loan limits?
• How do you vet my rehab project and contractors? How do i get my rehab draws?
• What are the document requirements? Closing timelines?
• Any fees paid prior to closing? All fees at closing? Any fees after closing?
• What would my rate and points be on this deal? (this will let you know what they require to price a deal as well).
• Do you require an appraisal/drive by/BPO? How is that paid for/completed?
• Anything that makes you stand apart from other lenders?

If you want to vet your HML, they probably won't give you a direct client (investor) as this would be the easiest way to poach investors from a HML. They very likely will give you brokers/appraisers/title companies that they have done business with. Just ask!

Find out what your pricing is with a HML and then try to get better terms with them.

/edit 10% interest, payable when you sell the property is a good deal though that you likely won't beat with a HML. Note that you don't want to pay 10% over the term, you want to pay 10% for a year term. i.e. if you get out at month 6, 5% interest is paid.

@Jason Guinard lots of good advice from @Johnathan Boyle and @Nghi Le.

I think a good HML will add value like Nghi stated by being the eyes. Reach out to multiple HML's and see who is the best fit. It isn't just a one

Also love the 'Boyle Venture Group' business name John!