All Forum Posts by: Mark Safrin

Thanks Chi Ta. I presume you wish to invest in California where you live? We do not yet lend directly in that state for smaller loans. (In a year's time we probably will). If you PM/email me, I will be happy to refer you to a good lender to whom we have referred lots of happy CA clients in the past.

If you are considering a HML, consider if you can go slightly upmarket. You will probably find it easier to get a HML for say a $100k loan (including rehab) than a $50k loan. The interest and points will likely be better too. Many lenders have a loan minimum.

The reason is that it is the same amount of work for us HMLs to lend $100k or even $800k as a to lend $50k. So if I am going to devote a few days of my life to originate, process and close this loan, it has to be worth my time.

Best wishes on your RE adventures.

Is there any reason that the two partners with the issues simply _have_ to be on the loan? I presume that you have neither of these issues, perhaps just you and your own LLC can take a new HML loan out?

I assume that what happens after the loan is taken out is presumably between you, your partners and your legal advisor.

 To answer your questions above:

1) You need capital for the downpayment not covered by the HML, closing costs of all types including appraisal, title, insurance, fees and points. Plus funds for rehab (if any) till the first milestone. Plus of course funds for cost over-runs and emergencies. And don't forget funds for servicing the loan until the property is stabilised or flipped.

2) No, HMLs are probably not for those with a poor financial situation (see #1 above). HMLs are for those that do not qualify for conventional loans due to unvarifiable income or other income issues, or they want to purchase property a bank doesn't want to lend on, or they wish to rehab which most banks won't fund or, and this is often important, the closing time for the purchase is less than the time a bank needs to close the loan.

3) Real Estate investment meetups are one way to find HMLs. Another is to look at the Bigger Pockets lender directory for those that lend in your state. Another way is to connect with and look at the profiles of those lenders active in answering people's questions here in the BP forums. :)

4) As per the above, HML advantages usually include:

- No income or tax return verification

- Rehab money

- Fast closing 

Disadvantages:

- Higher interest rates

- Points and another charges 

The higher interest rate especially is why many people purchase and rehab with HML via short term, interest-only loans and then as soon as possible refinance with conventional loans.

Wishing you every success in your Real Estate future.

It varies by lender but I'll give you ours as being typical...

You will be lent the lower of either 75% of LTV (as is value) or 90% of purchase. Since you are not experienced it might be 65% of LTV.

Rehab money is separate and funded at (usually) 100%. However it is paid in draws, in arrears, and held in escrow until each milestone is signed off.

This means you still need to fund (or find funding) for:

- the downpayment, whatever the HML does not cover of the purchase. Yes you need to put one down and yes you will have some skin in the game.

- closing costs including points,  fees of various descriptions, title costs, insurance, and appraisal...

- rehab costs, at least until the first milestone. 

- reserves for cost over-runs and unexpected emergencies

- servicing the loan until the property is stabilised or flipped or whatever, once again this might be longer than expected.

Best of luck with your future BRRRR empire!

I think that time is probably going to be an issue. Say you find another lender on Monday (long holiday weekend as I type), that gives 10 days (?) for that HML to close including a weekend. Are you able to get an extension?

Perhaps consider having a chat with a lawyer as to what legal recourse you have?

There does not seem to be a plethora of HMLs wanting to lend short term loans in OH, I was searching around for one the other day for a client we could not service ourselves.

If you, the property and the deal all qualify for conventional loans, go for the conventional loans. Hard Money will have higher interest rates and probably higher closing costs than conventional. HMLs are used when conventional loans dont want to lend to you or on the property or close fast enough for the deal

When approaching a HML you can discuss general terms and rates if you like but it will be even more beneficial if have: Your target property address (if you have one), property type, approximate loan size and LTV and rehab amounts if any and ARV. Your credit score, your number of previous deals. If it's a long term refinance have the rental, tax and insurance on hand for DTI calculations.

Questions to ask a HML depend on your needs but can include: Loan minimums, can they lend in that state, MSA requirements (if you are investing in rural properties), interest rates, interest rate types (eg. Fixed, interest only, fully amortized or balloon etc...), closing points, up front fees, percentage of purchase/LTV/ARV caps, is rehab upfront or in arrears...

But start with Loan Minimums. If you need $50k including rehab and their minimum loan size is $80k (like mine) then the other questions are moot at least for your current loan needs.

Best of luck with building your BRRRR empire!

Chi Ta, I am reading your various questions. Cant speak for other but as Hard Money lenders we don't have a number of loans to you limit. Need 20 loans? My lending capacity is, for practical purposes, unlimited. Your ability to to pay for loan deposits and costs however is probably not unlimited 

You will need to find the ability to pay the deposit of whatever % of purchase we do not cover. (We have a % purchase cap and %of LTV cap). You are going to need skin in the game unless you can find creative solutions like owner financing, friends/relatives happy to take a second lien position or whatever.

However as you grow your BRRRR empire, your income increases. You can afford more and bigger loans.

Now personally you can make a deal and doing business with you easy and attractive to a HML like me. For instance:

- If you want a ballpark rates and terms quote over the phone, consider coming knowing your prospective property acquisition address, approximate purchase price, LTV, ARV, your credit score and a simple property count of your experience.

- Your property should be in my comfort zone which in my case includes: Well above my minimum $80k including rehab loan size (the more the better), not too rural (seriously no McMansions somewhere in outer Hicksville - nothing against people living there, my underwriters seem allergic to wide open spaces), no groundups or land or mobile parks.

- Please don't come to me saying that so and so has offered better rates or less points or less closing fees. Unless this deal is REALLY attractive (currently this means starting with a loan above 1M) my reaction will likely be to smile, wish you well and say to go with the other guy. We get lots of people who come back to us sheepishly mentioning that other guy wanted 30-45 days to close). 

None of this is to scare you off however. :)

Hope this insight helps. Best of luck in your endeavors. 

Marelyn, good ideas. Don't understand your difficulty finding Hard Money though. HMLs generally look at the property asset and probably your credit score and experience. Not income verification. In fact one of the reasons Hard Money Lending has boomed is because we don't have this requirement that conventional lenders do.