All Forum Posts by: Kerry Boyle

So, while this seems like a nice cash-flowing property. I don't see great numbers to get money out after rehab unless you put a bunch of money down.
Conventional mortgages usually require at least 6 months seasoning. The best cash-out refinances I have seen are 75%, so if you find someone who will do 80% (it may exist) you would get 120k out based on a 150k appraisal (less origination fees etc).

Get an amortization schedule, plug in your rate/term and find the date that you can pull 120k less the balance remaining on your mortgage =  30k out. That wouldn't include the 300/mo cash flow also.
This sounds more like a long term investment with good cash-flow.

Full disclosure I am a HML.

Make sure you line up your conventional financing as soon as possible - I always see issues with seasoning on any financing backed by Fannie/Freddie, particularly when it is a cash-out scenario. You will want to confirm the seasoning requirements as soon as possible. I have found it varies depending on how much money you are asking - Do you want a percentage of the 66k, do you want a percentage of the 96k, do you want cash-out based on the ARV? AND HOW SOON do you want it?

Conventional is cheapest, but has lots of restrictions - always try to get this for funding if it works for you.

HML is more expensive, but you can get more money out and leverage your money to invest faster.

There are more pros and cons to both, this was just what I found to be prevalent to the conversation. 

My perspective as a HML: We are always looking for people who are looking to ramp up to 50+ units a year; However, 75k properties are more risky than 150k properties because if market starts doing poorly the lower value properties scale worse. This is why most lenders don't lend under a certain threshold.
I don't believe you said anything about which areas of the country you are buying - but it appears like your expertise and positioning for cap% has led you to a specific market. This is another very risky issue for lenders. *if you are own 51 properties in Cleveland and Cleveland's biggest job provider moves to Detroit, you can end up with a large % of vacant/non-paying rentals. Diversity reduces risk.

Specifically, I think portfolio lenders can get similar (or maybe slightly less) returns with significantly less risk.

Not sure if this will help, but may be worthwhile to see the side of the lender.

Great point! Skin in the game is something a lot of lenders require.

As a HML, I can confirm that 1M cap doesn't exist (at least not for all lenders).

We funded two deals that were 2.5M this month.

Has a seller ever done that? I can't imagine a seller willing to do something especially if the home is already distressed. I think that any HML would do something similar if the seller was willing - they essentially are only funding 75%. The remaining risk is with the seller, so the HML is in the same position up until the project is complete and the new owner is faced with selling or refi'ing including that 25%.

@Jesse Young - I would try to partner up with someone who has the money and doesn't have the contracting know-how. Your expertise is valued, get a rock solid operating agreement and make sure an attorney advises you.

@Josh C.

I've seen the same thing in Indiana! Crazy rental market.

@Kevin Geary

I agree with pretty much everything in this thread, but wanted to add this:

At a certain volume your couple hundred thousand in equity isn't enough. If you plan to get to the volume of flipping that exceeds your HELOC, LOC, there is always your good buddies at the hard money store.

I believe I have built personal relationships with investors as a hard money lender. I can travel to their location and meet them, host them at my office outside of DC, and figure out ways to gain flexibility where needed. 

Can anyone chime in on a HML that was impersonal or completely done through a computer?

Yep fat fingers, on the first mistake (96 rather than 95). Let's just chalk the second mistake up to a long day? :)

I really love the design work, this was a very professional deal and it looks like you got a great deal with the HML. Nice work and good luck on future investments!

Continue posting!!