All Forum Posts by: LaMancha Sims

What do you look for in a Private/ Hard Money lender when you are considering your cost of capital? 

 Caleb,

Questions... All in at 70% but what is that max margin(in terms of the %) an investor has to have in order to feel comfortable? Is 70% really it or if the deal is really a great one would an investor go higher? 

I am asking these questions to get an understanding about true risk/reward v/s costs an investor is willing to take... 

 Jeff,

 I agree with your 3. However, how (to what degree) does the cost of capital fit into the picture or does it? 

So, you do not consider how much the financing will cost you? Or is that part of your calculation(s) when you ask - How much you will make from the deal? 

How do you determine what's a good private lender? If you are using private/hard money to finance your deals? 

I am curious as to what an investor looks for when truly evaluating a deal? What's the top 3 things that makes a deal worth your time?

Investment Info:

Condo private money loan investment.

Purchase price: $45,000
Cash invested: $15,000
Sale price: $90,000

Triton provided the financing and consulting to a new investor to acquire, repair, and flip a property for a nice profit by all parties.

What made you interested in investing in this type of deal?

This was a special project because my team got to work with a new investor that was afraid to "Get into the Game". However, once she did, she surprised herself on how well she handle everything and the profits made! A true win for everyone.

How did you find this deal and how did you negotiate it?

This deal was picked up from a Wholesaler. There are still some very good Wholesaler out there!

How did you finance this deal?

We financed the deal using private money for the investor.

How did you add value to the deal?

Walking this new investor thru each stage of the deal and allowing her the space she needed to learn and seeing the light go off within her was exciting. Directing her to the right resources that not only help her overcome her fear of this project but gave her a level of confidence to handle issues that comes up in any rehab project was yet another exciting aspect to deal. The true value added was not just the money everyone made but seeing a new investor "Get into the Game".

What was the outcome?

Property sold with a nice profit!

Lessons learned? Challenges?

You cannot teach Patience. This is something that has to be learned by every Investor on each deal!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

She got a chance to truly build a good long term Real Estate team at all levels.

@Kaylee Walterbach. The best tried and true money saving strategy of all time still remains for people to shop 3 quotes on big ticket items, prior to making a decision. 

The hard money loan is considered asset-based financing. This simply means that the person who is borrowing uses the physical property as security in exchange for financing. This type of transaction mostly involves real estate investments and is very similar to short-term bridge loans. Often referred to as bridge loans, hard money loans are short-term lending instruments that are also used by real estate investors for financing an investment project. This type of loan is a tool for house flippers who want to renovate or develop a property and then sell it for profit. These loans are not issued by banks or any other financial institutions, but by some private lenders. There are many reasons to consider getting a hard money loan instead of taking the conventional mortgage from the bank. Some main benefits of this lending option are the following:

Have fewer requirements

As compared to traditional bank loans the hard money lenders have few requirements. They just include a few requirements such as the borrower having enough equity in the property, sufficient cash on hand for making monthly payments, and a reasonable strategy to exit. On the other hand, banks have a non-ending list of requirements that a borrower must meet to qualify for financing. The interest rates for banks are lower however, the red tape makes the process longer and is many cases jeopardies the deal at any time prior to closing. This leaves the Investor in a position of uncertainty, sitting on pins and needles wating to see if anything will go wrong prior to closing the deal. Whereas, with the hard money lender the rates are higher but with limited red tapes the deal close faster ensuring the Investors does not miss out on the property and making profits.

Low credit scores accepted

It is not a secret to all of us that banks will deny you for having a low credit score. But on the other hand, hard money lenders make their decisions based on the profitability of property and less on the credit. So, this means that the investors who have a credit score of 600 or higher are normally approved for hard money loans. In case, even if the credit score is lower the investor maybe able to explain the situation to the hard money lender and still get the financing because of the overall deal.

Fast turnaround

As compared to traditional bank loans the hard money loans can close faster and has more flexible with terms and conditions. The main concern of any private lender is the value of the collateral. This means that your current financial status and employment situation are secondary considerations when using the hard money lender. You also don't need any tax forms, in many cases bank statements, or past experience.

Volume

The hard money lenders also allow you to leverage other people’s money. Meaning that investors can fund more than one deal at a time. In the case of traditional loans, you won't be able to do anything like this. Nor will a will the traditional bank financing all the renovation that maybe require to get the property up to a standard to sell. If you want to grow an investment business doing more than one deal at a time, then consider the hard money lender as one of your best options.

Convenient process

If you are applying for a mortgage, then you need to know that it is very time-consuming. Since the process can take in many cases more than 30 days to give you a loan this puts the investor at risk of losing a particular property. But with hard loan money, funding is possible in a few weeks only. This is particularly important if you are funding a large-scale development project. As in everything when investing compare the hard money lender that you plan to work with because all lenders are not the same. And as always remember no one makes money until they “Get in the Game!!”

Real Estate Investing, in reality, is not as easy as it looks in movies and reality shows. There are cost overruns due to many unforeseen issues that comes with renovating a property. Making already slim margins to start with even more challenging to most Investors. Now, when it comes to building a house then you may have more control over each stage of development, which should allow an Investor to control costs and increase profits if planned and managed properly. However, deciding between building v/s rehabbing, depend on many factors but just comes down to what’s most suitable for you in achieving your future business goals. In this article, you will be able to get a good idea about whether it's better to build new or to renovate the existing property.

Cost-effectiveness

In constructing any project, cost-effectiveness is one of the most influential factors. It is embedded in our minds that starting construction on a fresh plot and erecting a new property will be a costly option. This means that you would be responsible for the site work, installation of utilities, and other work till the structure is finished. Constructing a new property is a complex process but there are many instances where renovations can be more expensive.

The older the properties, the more money you would need to renovate it. In addition to this rehabbing a property also leaves room for the unexpected. That means that your construction team won't be very sure what surprises or conditions they’ll face once they start construction. This means that. This case can occur if toxic materials like lead paint, asbestos, etc. used in the previous construction and need to be mitigated. So, this would cost you a lot of money, thereabout cutting into your profits.

Project duration

The time needed for constructing a new property is greater due to the large amount of work from developing the site for the house to giving the property the finishing touches to sell. In addition, to the number of sub-contractors, county inspectors, and other building regulations that you must manage along with your General Contractor. If you do not have a building license, which most states require, you will have to hire a General Contractor which is yet another cost that cuts into your profit margin. Building houses can be an overwhelming business venture for most Investors. On the other hand, rehabbing can be a quicker option because you are not starting from scratch and the amount of work should be less. Well, this might not always be the case, especially with some older historical properties. The duration to complete the project can span beyond the time needed for constructing a new property. A lot to think about when evaluating which option is best for your business goals.

Attractiveness

As we all know, the aesthetics and design of buildings send powerful messages to the people who visit them. Luxurious finishes can give the feeling of comfort, sleek and modern finishes can give the feeling of efficiency and a simple design can give the feeling of sophistication. So, when it comes to a new home, it gives you control over the final look. This means that in the case of a new property you can design the project exactly like we want it to be. The size, layout, interior, make it smart, and other features will be according to what you are the buyer desire.

When it comes to renovating a property then you are somewhat limited to the fineness of the structure that already exist. No doubt that you can add many things to the structure to make it suitable to your desired outcome or the buyers needs but you still have many limitations due to space and costs. These are just a few things to consider, and we have not even talked about the overall team that you need for each type of project. Overall, think about what you want to do what makes money and what make sense for your area and your long-term business goals and remember no one makes money until they “Get in the Game!!”