All Forum Posts by: Herndon Davis

I have a client right now who I am helping to get financing to re-finance a six unit property that needs extensive work at 0% occupancy.

Step #1 We calculated the pay off amount.

Step #3 We estimated the rehab costs based on a contractor inspection and analysis

Step #4 Based upon Realtor comps on existing units in the immediate area we estimated how much the property would get from total revenue on an annual basis

Step #5 We calculated the NOI by backing out the annual taxes and insurance from step #4.

Step #6 We found Cap rate by going on commercial sites looking at assumptions others were making for that zip code.

The biggest challenge we had was finding one of my existing lenders that would loan on a commercial property that needed a refinance PLUS significant repair AND was also at 0% occupancy!!

It was very tough but I was able to find a private money lender that was willing to do the deal at a bit higher but not totally unreasonable rate.

So our goal would be to refinance after 1-2 years of rent stablization for a lower interest rate.

Let me know if you have any questions!!

I have a client right now who I am helping to get financing to re-finance a six unit property that needs extensive work at 0% occupancy.

Step #1 We calculated the pay off amount.

Step #3 We estimated the rehab costs based on a contractor inspection and analysis

Step #4 Based upon Realtor comps on existing units in the immediate area we estimated how much the property would get from total revenue on an annual basis

Step #5 We calculated the NOI by backing out the annual taxes and insurance from step #4.

Step #6 We found Cap rate by going on commercial sites looking at assumptions others were making for that zip code.

The biggest challenge we had was finding one of my existing lenders that would loan on a commercial property that needed a refinance PLUS significant repair AND was also at 0% occupancy!!

It was very tough but I was able to find a private money lender that was willing to do the deal at a bit higher but not totally unreasonable rate.

So our goal would be to refinance after 1-2 years of rent stablization for a lower interest rate.

Let me know if you have any questions!!

Ironically I have a client right now who I am helping to get financing to re-finance a six unit property that needs extensive work. 

Step #1 We calculated the pay off amount.

Step #3 We estimated the rehab costs based on a contractor inspection and analysis

Step #4 Based upon Realtor comps on existing units in the immediate area we estimated how much the property would get from total revenue on an annual basis

Step #5 We calculated the NOI by backing out the annual taxes and insurance from step #4.

Step #6 We found Cap rate by going on commercial sites looking at assumptions others were making for that zip code.

The biggest challenge we had was  finding one of my existing lenders that would  loan on a commercial property that needed a refinance PLUS significant repair AND was also at 0% occupancy!!

It was very tough but I was able to find a private money lender that was willing to do the deal at a bit higher but not totally unreasonable rate.

So our goal would be to refinance after 1-2 years of rent stablization. Let me know if you have any questions!!

For those who are capped and constrained by all of the Conventional Fannie Mae/Freddie Mac rules on investment real estate lending, you should give the Non-QM (Non-Qualified Mortgage) world a try. I've detailed below both the advantages and disadvantages of Non-QM loans/lenders. Please let me know if you have any questions, I'd be happy to follow-up!

WHAT ARE NON-QM (NON-QUALIFIED MORTGAGE Lenders/Loans?

Non-QM (non-Qualified Mortgage) lenders are non-bank depository lenders. They are corporations that are NOT regulated by traditional Fannie Mae/Freddie Mac guidelines. They are focused on business real estate investors whose needs have outgrown the Conventional lending market. In the Non-QM world, we do NOT calculate personal DTI (Debt Ratio) or look at personal taxes, or even look at personal income. You can be unemployed with no W-2 income and not filed taxes and still qualify for a Non-QM loan!!

Why???

Non-QM lenders are asset based while Conventional lenders are credit based.

Non-QM lenders focused solely on the following criteria when green lighting your deal:

1-The ability of the property to cash-flow in terms of covering its underlining debt; or its ability ti appraise with ARV that covers the debt if you are flipping.

2-The credit of the borrower (660 or higher, preferably above 700)

3- Your liquidity (do you have 3-6 months of liquid assets) after you close on the property.

That's it!!

8 ADVANTAGES of NON-QM Loans/Lenders

1-Can make loans to legal entities (i.e. LLC, Corp etc.), Family Trusts etc.

2-Can consolidate various mortgages into ONE portfolio loan

3- No mortgage Insurance

4-Will loan on BOTH Commercial Residential (5+ units) and Commercial Business (retail, office, warehouse etc)

5-Loan Amounts range from $45K minimum (residential) to maximum $5M (Commercial).

6-Do NOT need a job, income to apply.

7-No limit on the number of mortgages you can have

8-In some instances can cross collateralize property

4 DISADVANTAGES of NON-QM Loans/Lenders

1- 20% down payment

2-Typically 2 pts lender fees or more

3- Slightly higher interest rate if your credit is below 700 or the the property DSCR (debt service coverage ratio) is below 1.3.

4- Show 3-6 months liquidity left over after you close on the property

So how exactly do you vet Private Money Lenders when “Private” is their First name?? Let’s be clear, I’m not talking about Hard Money Lenders who are somewhat regulated by your state or local real estate boards. Instead I’m talking about the shadowy figures who plead they are a group of private well-to-do individuals who don’t want their names, addresses and business dealings disclosed to the investors they fund or to the general public.

The individuals who hit you upon on networking sites or who find you through other means to offer their assistance. I'm talking about the smooth talking folks stalking local real estate networking events with their business cards on-ready. Unless you go on a solid recommendation from someone you trust, you really don’t know if a Private Money lender is real and trustworthy or fake and criminal. It only takes getting burned once to quickly weed out the crap.

So if you can't qualify or choose not to pursue a Non-QM (Non-Qualified Mortgage) or Conventional Mortgage then here’s what you need to do to vet Private Money Lenders before you’re taken to the cleaners.

#1- Don’t be too anxious or hard up to find a Private Money Lender!! These folks smell your desperation, your newness and can easily emotionally manipulate you by dangling an allusion of their wealth in front you. Don’t fall for the “I’m ultra successful” act. Anyone who brags about it too much ain’t it!

#2- Choose a Private Money Lender that’s recommended to you from someone you TRUST. Avoid Private Money Lenders who mysteriously contact you out-of-the-blue without context or explaining how they found you. You may want to network at local real estate events to find local Private Money Lenders but remember just because they’re local doesn’t mean they’re trustworthy!

#3-Avoid any Private Money Lender who balks at being vetted, investigated or who wants you to simply accept their word with a handshake, a smile, a reassuring phone call or a calming email. If they try to make you feel small, silly, too new to the game of real estate investing to be taken seriously, then RUN AWAY LIKE HELL!!

#4- Require that your Private Money Lender disclose their full identity, personal and company contact information that can be verified, skip traced along with proof of the nature of their business, bank and client references etc. Always check client references BUT remember the client references can be in on the con as well, so still you have to investigate further even if you get glowing references.

#5- If you happen to be a Loan or a Mortgage Broker working with a Private Money Lender funneling your clients to them, then you should require a Broker Agreement be created that contains the Private Money Lender's verifiable and skip traceable identity that clearly states your broker compensation fee once the loan is closed at ANY time. Some lenders will try and avoid paying you by denying the client at the last minute then picking them back up again at a later date.

#6- Check to see if your Private Money Lender or group of individuals are actually Accredited Investors per the federal government criteria. If not then it isn’t necessarily a major red flag but should definitely give you pause going forward.

#7 – Ask around on LinkedIn. Check their website, news sites, google searches, Yelp, 411.com and any other social media platform to investigate your Private Money Lender.

#8 Require that any points the Private Money Lender charges you MUST be transacted at the closing table and NOT sent in advance of the deal. Some con artists will say they want a Good Faith deposit to show that you’re really serious about dealing with them. RED FLAG RUN AWAY!!

Instead you should send points to the Title company that YOU choose to be held in escrow until the Lender wires the loaned amount to Title to close the deal.

#9 –Require that the Private Money Lender agree to accept recent a tri-merge credit report pulled by YOU that has redacted or blacked out SSN information.

Always remember to Do YOUR part in vetting Private Money Lenders. Great success to you in your real estate investing endeavors!!

So how exactly do you vet Private Money Lenders when “Private” is their First name?? Let’s be clear, I’m not talking about Hard Money Lenders who are somewhat regulated by your state or local real estate boards. Instead I’m talking about the shadowy figures who plead they are a group of private well-to-do individuals who don’t want their names, addresses and business dealings disclosed to the investors they fund or to the general public.

The individuals who hit you upon on networking sites or who find you through other means to offer their assistance. I'm talking about the smooth talking folks stalking local real estate networking events with their business cards on-ready. Unless you go on a solid recommendation from someone you trust, you really don’t know if a Private Money lender is real and trustworthy or fake and criminal. It only takes getting burned once to quickly weed out the crap.

So if you can't qualify or choose not to pursue a Non-QM (Non-Qualified Mortgage) or Conventional Mortgage then here’s what you need to do to vet Private Money Lenders before you’re taken to the cleaners.

#1- Don’t be too anxious or hard up to find a Private Money Lender!! These folks smell your desperation, your newness and can easily emotionally manipulate you by dangling an allusion of their wealth in front you. Don’t fall for the “I’m ultra successful” act. Anyone who brags about it too much ain’t it!

#2- Choose a Private Money Lender that’s recommended to you from someone you TRUST. Avoid Private Money Lenders who mysteriously contact you out-of-the-blue without context or explaining how they found you. You may want to network at local real estate events to find local Private Money Lenders but remember just because they’re local doesn’t mean they’re trustworthy!

#3-Avoid any Private Money Lender who balks at being vetted, investigated or who wants you to simply accept their word with a handshake, a smile, a reassuring phone call or a calming email. If they try to make you feel small, silly, too new to the game of real estate investing to be taken seriously, then RUN AWAY LIKE HELL!!

#4- Require that your Private Money Lender disclose their full identity, personal and company contact information that can be verified, skip traced along with proof of the nature of their business, bank and client references etc. Always check client references BUT remember the client references can be in on the con as well, so still you have to investigate further even if you get glowing references.

#5- If you happen to be a Loan or a Mortgage Broker working with a Private Money Lender funneling your clients to them, then you should require a Broker Agreement be created that contains the Private Money Lender's verifiable and skip traceable identity that clearly states your broker compensation fee once the loan is closed at ANY time. Some lenders will try and avoid paying you by denying the client at the last minute then picking them back up again at a later date.

#6- Check to see if your Private Money Lender or group of individuals are actually Accredited Investors per the federal government criteria. If not then it isn’t necessarily a major red flag but should definitely give you pause going forward.

#7 – Ask around on LinkedIn. Check their website, news sites, google searches, Yelp, 411.com and any other social media platform to investigate your Private Money Lender.

#8 Require that any points the Private Money Lender charges you MUST be transacted at the closing table and NOT sent in advance of the deal. Some con artists will say they want a Good Faith deposit to show that you’re really serious about dealing with them. RED FLAG RUN AWAY!!

Instead you should send points to the Title company that YOU choose to be held in escrow until the Lender wires the loaned amount to Title to close the deal.

#9 –Require that the Private Money Lender agree to accept recent a tri-merge credit report pulled by YOU that has redacted or blacked out SSN information.

Always remember to Do YOUR part in vetting Private Money Lenders. Great success to you in your real estate investing endeavors!!

So how exactly do you vet Private Money Lenders when “Private” is their First name?? Let’s be clear, I’m not talking about Hard Money Lenders who are somewhat regulated by your state or local real estate boards. Instead I’m talking about the shadowy figures who plead they are a group of private well-to-do individuals who don’t want their names, addresses and business dealings disclosed to the investors they fund or to the general public.

The individuals who hit you upon on networking sites or who find you through other means to offer their assistance. I'm talking about the smooth talking folks stalking local real estate networking events with their business cards on-ready. Unless you go on a solid recommendation from someone you trust, you really don’t know if a Private Money lender is real and trustworthy or fake and criminal. It only takes getting burned once to quickly weed out the crap.

So if you can't qualify or choose not to pursue a Non-QM (Non-Qualified Mortgage) or Conventional Mortgage then here’s what you need to do to vet Private Money Lenders before you’re taken to the cleaners.

#1- Don’t be too anxious or hard up to find a Private Money Lender!! These folks smell your desperation, your newness and can easily emotionally manipulate you by dangling an allusion of their wealth in front you. Don’t fall for the “I’m ultra successful” act. Anyone who brags about it too much ain’t it!

#2- Choose a Private Money Lender that’s recommended to you from someone you TRUST. Avoid Private Money Lenders who mysteriously contact you out-of-the-blue without context or explaining how they found you. You may want to network at local real estate events to find  local Private Money Lenders but remember just because they’re local doesn’t mean they’re trustworthy!

#3-Avoid any Private Money Lender who balks at being vetted, investigated or who wants you to simply accept their word with a handshake, a smile, a reassuring phone call or a calming email. If they try to make you feel small, silly, too new to the game of real estate investing to be taken seriously, then RUN AWAY LIKE HELL!!

#4- Require that your Private Money Lender disclose their full identity, personal and company contact information that can be verified, skip traced along with proof of the nature of their business, bank and client references etc. Always check client references BUT remember the client references can be in on the con as well, so still you have to investigate further even if you get glowing references.

#5- If you happen to be a Loan or a Mortgage Broker working with a Private Money Lender funneling your clients to them, then you should require a Broker Agreement be created that contains the Private Money Lender's verifiable and skip traceable identity that clearly states your broker compensation fee once the loan is closed at ANY time. Some lenders will try and avoid paying you by denying the client at the last minute then picking them back up again at a later date.

#6- Check to see if your Private Money Lender or group of individuals are actually Accredited Investors per the federal government criteria. If not then it isn’t necessarily a major red flag but should definitely give you pause going forward.

#7 – Ask around on LinkedIn. Check their website, news sites, google searches, Yelp, 411.com and any other social media platform to investigate your Private Money Lender.

#8 Require that any points the Private Money Lender charges you MUST be transacted at the closing table and NOT sent in advance of the deal. Some con artists will say they want a Good Faith deposit to show that you’re really serious about dealing with them. RED FLAG RUN AWAY!!

Instead you should send points to the Title company that YOU choose to be held in escrow until the Lender wires the loaned amount to Title to close the deal.

#9 –Require that the Private Money Lender agree to accept recent a tri-merge credit report pulled by YOU that has redacted or blacked out SSN information.

Always remember to Do YOUR part in vetting Private Money Lenders.  Great success to you in your real estate investing endeavors!!

Yes I do he's also real estate investor friendly.  Shoot me a note and I'll send you his info.  I don't think he's on BP

If he has permission of the landlord yes. It's called Airbnb Aribitrage. But it only done with permission of the landlord.

Somehow connect them together as one building unit and rezone use, addess etc, once thats done you can refinance or sell as commercial adding the value you seek.