All Forum Posts by: LaMancha Sims

I think you make a fair point, @LaMancha Sims. 

When you are working with a single lender, they are fully aware of your entire portfolio and may save the investor from becoming over-extended. I have seen this happen to one of my clients. He wanted to continue purchasing property with loans from us, but management noted how many vacant/under renovation projects he owned at the time and cautioned me to push pause considering the potential for being over extended. At first, my client scoffed at the idea, but went along with it since we were his preferred lender. A few months later, he came to us and shared that he was indeed overextended and had too many projects going at once. This was about 18 months ago, and with us nearly out of the hole and all projects renovated, rented and refinanced, he now thanks us for pushing pause when we did. 

At the end of the day, it is good to have a couple dedicated lenders as mentioned by @Robin Simon. Each lender may specialize in different aspects (renovation loans verses rental loans) or simply help you know if your preferred lender is keeping pace with the overall market. That said, if you work with too many lenders, it could potentially cause an investor to overextend if the lenders they are working with do not qualify income, credit, ask for a schedule of REO, etc. (hard money/private lenders).

A good rule of thumb to prevent this is to ensure the investor keeps about 4-to-1 or 5-to-1 equity in each deal. If the investor is unable to keep that amount of equity per deal, plus have the cash reserves for expenses/improvements, they need to be aware of the risk and weigh the pros and cons of potentially becoming overextended should the market shift, unexpected problems arise, etc.

Happy Investing! 

I think an investor should have one or maybe two dedicated lenders if doing scale.  Pretty much all lenders will eventually regress to the same general terms/rates in line with the market, so best to find one you trust and can rely on and like working with

I think essentially its the price point. You can do well in flip, or BRRRR...or new build SFH, or converting commercials to rentals, as long as you get a good price.

I don't see any great price yet in my area, but I think with a sustained high interest rate, we should see better deals popping out. I did see great hotel converts to rentals back a few years back. A couple of hotels were distressed.

@LaMancha Sims "Cost of Capital" is only important relative to what you might be able to get somewhere else.  The % interest is irrelevant unless you can do better elsewhere. Many people today are complaining about high rates. If you can do better elsewhere then do it. If you can't don't complain. 

What does matter is if the deal make sense. If I had to pay 20% interest to get a deal that makes me a 200% return, I would do it. That assumes the risk met my criteria and there wasn't another cheaper way to fund.  The point; the interest rate is not important, the profit you make is. 

Which goes back to what @Account Closed the cost isn't as important as the availability of money. Fast and reliable sources are important.

Hey Lamancha,

I'm making sure the property has multiple exit strategies. I want to be able to flip it, wholesale it, or keep it as a rental.

If I'm going to keep it, I want to make sure that there's going to be some equity kicker down the line. If there's some city developments/improvements that are going in, or if there's upzoning that I can take advantage of in the future I'll be looking for those things.

I also have to have a walk-in equity position where I can force appreciation through rehab.

If a deal has those three aspects to it, I'll do more due diligence on it and probably take it down. Right now I'm padding all of my proformas and calculators with longer hold times and higher reno costs. We see that renovation costs are starting to come down as the market slows but it'll still be some time until we have competitive rates back on most of our subs. Control your costs right now!!