All Forum Posts by: Kerry Boyle

@Levi Jones Most hard money lenders will want to have a loan above 50k and won't provide loans below that same as banks. Sounds like you need PML's. Use hard money for the project and refinance out though, don't look for a hard money loan that is long term - typically they are higher rates.

You can close in time with a HML or PML, but you may run into an issue if you were planning to occupy the property. Also both usually require some money down, which a 203k may not.

The good news is, if you do qualify for a HML, you can actually get the project done quickly and use a contractor you approve vs one your bank approves.

Best of luck, send a DM if you want more specific answers.

 I doubt you will need an attorney to review the loan docs. It should be very clear regarding draw fees.

Draw fees pay for the inspector to go to the property, and typically the wire fee to make the payment. Few lenders bring the fees up, but most have them.

Look at it from this perspective (theoretical): Two identical loans, one contractor requires the money to be paid throughout the project (say 5 times), the other contractor doesn't need the money til the end of the project (big pockets?). HML will verify work is being done before paying the contractor anything with an inspection (if they have to pay a 3rd party to go there), and also a wire transfer fee. Should the bank pay 5 times the inspector/wire fee just because your contractor wants money sooner?

Perhaps and perhaps not, but from what I see it is a common charge for HMLs. If your lender is local and they are willing to travel to check it out, you may not have to pay the fee, but it is still at the cost of their time (don't forget!).

HML sure do provide proof of funds letters!

Unlikely you will get a HML with properties that low value. Some HMLs are 40k loans and above. 75k is average minimum loan from what I see.

If I had 12k, I would try to partner up and get to 25k or so, then find a property around the 50-80k acquisition area and a lender willing to lend 100% of repairs budget. Then house hunt! Maybe in the opposite order depending on your contacts.

I just ran a quick calculator based on (what I consider) expensive hard money numbers. 
Sales Price 230k, repairs 60k, ARV 400k and 5% realtor and profit was almost 64k not including taxes for the 6 month term if you were to flip it. You would be sitting on quite a bit of equity if you were financing out.

It looks like a winner to me based on your numbers.

This is a difficult one!

I previously worked selling REO/Short sales for another company and we once thought the value was 500k in disrepair, after looking inside we found it to be worth about 250k. Jersey has a particularly heinous foreclosure timeline, so she probably hasn't been paying for at least 5 years - which means a lot of deferred maintenance and damage. My point in saying that, is a lender may not be comfortable stretched to 80% of acquisition without any interior knowledge and this market in particular.

Your best bet is a local lender who won't require an appraisal. At least reach out to your HML and ask if there is any work-around.

Further, find out if the owner knows a realtor that they trust. Maybe you can get a BPO out of it, or at least interior photos. I have no idea why this works, but I have used it successfully before. 

You can also try offering her security deposit and first month rent or something for a new place. It may be better than eviction. If she has an eviction on her record - she will find it basically impossible to rent. Logic may be impossible to use with someone who believes they don't have to pay for their house, so maybe try an emotion based argument.

Best of luck!

By the line - "their own appraiser", I would think one of two things is happening. 

1. They (local) are walking the property and estimating the value based on what they see, in a market where they are comfortable lending.

2. They are contacting a non-affiliated third party appraisal (that they may have done business with in the past) to appraise the property officially.

Both scenarios are generally true for your question. Some lenders don't require an official appraisal and that would be scenario #1, but they are still looking at the property and determining the value after the repairs. If scenario #2 and the appraisal is a disappointment, then you may have to put up more money in the deal and really believe the value that you estimated carefully.

So not totally sure about what you have going on with your existing properties in terms of value and equity, but if you are equity-rich you can cash-out refinance to get your liquidity up and invest more. You typically would have to sit on at least 35%+ equity to get anything meaningful out of a HML cash-out.

If that is not a possibility, there are some lenders that don't require a lot of money down and get their money back at the end of the loan. I'm not sure how many people are doing no money down or little money down in New York though, if that is where you are investing. It is a tough market for lenders in general.

How were you paying? Hard money isn't a take 50% of your profits kind of thing... unless your margins were very tight.

If you had 4 points and 12% interest (for instance) and can complete the project in 6 months, you are paying 4%+6% of the loan amount. Look into any other fees. Hard money lenders require you to put 25-35% down on average, some do less - typically the more money you put down the safer the deal and less interest you pay. if your ARV is 1.5x the acquisition price you are losing 6.7% of your profit from fees and interest, but you also are paying interest only and you should calculate the difference with whatever loan you are using.