All Forum Posts by: Kevin M Finley

Here's what I pay: 

2 points/ 12%. interest only. All payments and points paid back with principal.

6 month term. additional 6 months granted for additional two points payable upfront. 

90 day minimum interest. Depending on your state laws you can call this a prepayment penalty. 

So if I borrow $100,000 for the full 180 day (6 month) term, my payoff would be $100,000 + $2000 (2 points) +$6000 (interest). Your interest calculation is rate/360*days*principal. 

Like I said, this is what I pay, but follows the same formula as most. 

I learned a similar lesson but it wasn't an intentional theft by a contractor, but just blatant incompetence. He cost me a lot of money and time. 

Now I have a very specific contractor agreement complete with budgets and scopes etc. I also do not pay in advance. On a typical flip I will drop a dumpster for them and then after demo is complete they will get the labor portion of the demo line item. This is what they should be using to front the materials, lumber, drywall, etc for the next portion. I pay based on line item percent completion on Friday afternoons. 

If it is a large material drop that is many thousands I will meet them at the store and pay for it. I try not to use broke contractors so that mitigates that issue. 

It's tough for me to point at what the best strategy to get started is because they all require experience...

The wolesaling issue usually lies in the top-backward nature of our business. It's not much for a wholesaler to determine an ARV, but putting together renovation budgets is tough to do without having actually done a renovation before. Then on the negotiating side they offer more than a flipper is willing to pay, leaving them out $1000 earnest and a bad taste in their mouth.

Sometimes first timers miss awesomely too. I bought one last year that was presented as: $72k purchase. $15k renovation. $110k ARV.

Actual numbers? $72k purchase, $83k renovation, $225k sell.  

1. Do some deals. Any way possible. Just get them done. I used hard money. 

2. Build your portfolio and presentation skills. 

3. Tell literally everyone you meet that you're a real estate investor looking to pay great returns for short term investments. 

For me, investors started to crawl out of the woodwork after my 3rd flip. 

You're missing junk/ doc prep fees. I'm sure they're in there somewhere. I only have one lender that will do sub-$50k loans and they are six month terms at 5 points, 15% interest only plus $1900 in junk fees. 

Do both. Find a good local hard money lender and find deals concurrently. They will help answer any questions you have upfront and you will have a better understanding of the costs and fees when analyzing your deal. I have called and interviewed over 30 hard money lenders because it is a free resource adn I wanted a good idea of the national landscape. 

A FAIR HML will check the following boxes:

-2-4 points.

-12-15% interest.

-$1500-2500 closing costs/ doc prep.

-No appraisal (BPO or similar).

-90% LTC, 70%ARV.

-$100-200 draw inspection fees. 

Any numbers higher than those outlined should raise some eyebrows, and any lower than those should make you question their validity. Local is better. Many require appraisals, which is a hard no from me, but many borrowers have not had issues. In my market, appraisers are completely incapable of doing a "after renovation" appraisal, so it doesn't work out. 

To be safe, you will want to make sure you have in liquid cash 10% down, closing costs, and around 20% of your total project budget. With the right 0% credit cards and contractor relationships you can get a job done in as few draws as possible and just pay down your card with the draw disbursement. 

 It's funny Greg, I have the completely opposite mentality. I actually got started by using 10% down hard money loans and worked my way into private money. I learned a lot on the first few flips and how to calculate costs properly. 

I definitely think wholesaling is a much more advanced strategy than many advertise it to be. It requires a full understanding of the scope of the deal as well as seller negotiation and marketing. Yes, the financial barriers are lower and it's a great way to fuel your business, but it's not easy. 

I guess I don't think you have done anything wrong at this point, but others are right, there is no point in chasing. I prefer my lenders want to fund just as much as I want the funding. 

For reference, my process once I've introduced myself to the lender or started the conversation is to have a phone call/ lunch and discuss my business methodology and a few previous deals. I don't speak much on the details but will mention a few flip deals and terms paid. I then offer to send over my borrower profile. 

My borrower profile is a 15 page PDF which has personal information, local market statistics, past deals done by the numbers, and before and after photos of my flips. Typically once I send my borrower profile, the lender feels much more comfortable with this credibility document. 

I stay close in touch until I find a deal. When I present the deal, I will start with a ten minute phone call simply asking if there is interest. I will somehow throw the awkward "how much money do you have to lend" question in there, and I will send the property proposal. 

My property proposal is about six pages and includes a truncated scope of work, numbers, full MLS comparables and the math behind my ARV calculation as well as a line-by-line budget. I will then propose terms and then apply said terms to the deal on the next page.

I refine this method on every deal, and it is definitely work, but so is dealing with a hard money lender or line of credit, and I would rather do the work upfront and assure lenders of a solid investment foundation.  

As others have said, they tell you. 

I've interviewed many HMLs now around the country and on a $100k deal, they tend to all even out. Some may have higher points or interest, some may be slower but then slap you with a $2000 doc prep fee and high closing costs. 

Having done just three "hard money" loans before switching to straight private money, here's what you should look for:

-Reasonable orig and interest, 2-3 points and 11-15% interest. 

-No appraisals. BPO, multiple BPOs or anything but an appraisal. 

-Local, if possible. Buy the rep a cup of coffee. 

-Hard terms. No "As low as x% or down payments as low as 10%". You need to know your numbers going into the deal, not halfway to closing. I recently tried to do one where I was preapproved at 10% down but the lender decided when underwriting that they wanted 25%. I pulled it. 

My first deal I did at 5 points and 15%, $1900 closing costs, and $200 per draw. They took 10% down but kicked back $3000 in immediate renovation funds to buy materials. I paid a ton on that deal, but got it done and made money. 

Many of my buyers will be first time home buyers moving into the area, and I would assume don't want to spend the money on appliances. Very few flips in this area come sans appliances. 

I used to put side by sides or top-bottom fridges in, until I tried to sell on FSBO and 75% of the people that came to the open house walked right up to the french door fridge and opened it up with two hands. Now I spend the extra money.