All Forum Posts by: Mark Safrin

 Details such as how easy and actual % returns are above my pay grade.

But such investors that I am aware of seem happy.

Anthony. 

You are likely to need 25%-35% down plus a few thousand ($5k?) for loan closing costs plus more for contingencies and don't forget to have enough to start rehabbing at least until the first draw milestone. Oh and some extra to actually carry the loan until you can exit.

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Here is something else to consider: Most HMLs have a minimum loan size. Often around $75K and sometimes more. Rarely less.

You are unlikely to get more than a percentage of purchase. You will still need skin in the game. As a newbie you will probably get a lower percentage of purchase than experienced borrowers.

Lets assume that your purchase and As-Is value are the same. As a newbie you will likely only get 65% of the purchase (plus rehab). 65% of the highest purchase range you wrote is $39,000. So you will need at the higher end of both your purchase and your rehab just to make the minimum loan amount.

Then consider that we, for instance, as lenders want the non-Rehab amount to be a minimum of $50K and the rehab amount can make up the rest of the difference. 

Then consider that you even if you are just peeking over the minimum loan size, as a newbie your estimate of the As-Is value may not be what the appraiser thinks its worth. All you need is a low appraisal and once again you will be below the minimum loan size.

Just something to consider.

Best wishes in your real estate endeavors.

If you are going through a HML, it probably doesn't matter. 

Since you will likely only be lent a percentage of the purchase, you will need skin in the game. Most though not all of my borrowers want the maximum % of the purchase that I can give them. 

Whether the borrower pays the loan costs and the $ he gets from the loan is increased, or whether the loan portion the borrower actually receives is decreased to cover the loan costs, the borrower still needs to cough up the same amount of money down to make the purchase.

Just curious how risk averse you are. Do you have experience in this game? Do you have an underwriting team? Are you prepared to go through the foreclosure process and expense one any and all of your loans if necessary? 

From the fact that you are asking this question on BP I'm guessing the answer is probably No! Am I correct?

Are you just planning on lending out $2M and shutting shop when you run out of money while the notes you hold mature and hopefully get paid off?

You could be better off approaching a HML that needs more funds to churn and who also successfully sells notes as soon as the mortgage closes. Even at say (just floating a theoretical amount here) a mere half a point per loan, if the loans are recycling every week you can make a decent amount of money.

Best wishes in your lending career.

As a lender, I have seen plenty of borrowers disappointed with their appraisal. This is why we use a small select group of AMCs, usually Appraisal Nation, who have a dispute resolution criteria. It's a single page dispute form and gives you the opportunity to detail what the appraiser missed or why exactly your comps (listed) should be used and not the ones the appraisers used or whatever. 

We can therefore just give a borrower who wishes to dispute an appraisal; Appraisal Nation's phone number and say "Here's their phone number, work it out with them".

As a lender we dont want to get involved in a third party's appraisal. Both for impartiality's sake and also because it's a waste of our time that could be used to, you know, actually lend mortgages. 

If small banks and other conventional lenders won't step in (Have you asked around?) and your current private lender that you mentioned won't meet your needs, then perhaps a HML might do?

Some HMLs for instance will do a 30 year, fixed, fully amortized loan, for fully leased SFRs (1-4 units) including for cashout refis. Of course your credit score and other criteria  needs to be reasonable and there must be enough equity in the property and also sufficient property cashflow to make this worthwhile and meet the HMLs minimum loan size.

Best wishes on your endeavors. 

Presuming no legal issues (ask a lawyer!) Losing $1K vs needing to find $20K that you don't have... sounds pretty clear.

On the other hand, if this property is in OH, remember that this state is currently not over-serviced with HMLs and that your current HML will likely remember you backing out at the last moment after all the work they put into the deal.

As an aside, this is the exact type of reason some HMLs, including ourselves, take an upfront fee. For when the borrower gets cold feet at the very last moment.

Visio are an established HML, we used to use them back in our broker days before we aquired funds and became HMLs ourselves. They are legit.

Of course like any HMLs,  _You_ and your property need to fit into their loan criteria. A mere $100k (not sure how much "+" we are talking about) property might not be sufficient to meet a HMLs minimum loan size. This is because they may subtract from the maximum they can lend to you a) because you could well be considered an investment property newbie and b) if this is indeed a cashout.

We for instance would subtract 10% from our loan caps for the first and at least 5% for the second and the likely remaining 65% of LTV might not be sufficient to meet our $75k minimum loan size.

You should also make sure whatever HML you use is comfortable both lending on the type of condominium this is and in the State of Hawaii.

Aside from HMLs, there are also true private lenders (though the trust issue that you seem to have still applies to them), also some lending institutions that fall somewhere between conventional and HMLs. If you can find these.

But for most people with assets, good credit but low taxable income, HMLs tend to be the way to go. You can always ask here on BP for users experiences with any particular HML you are contemplating using who are willing to lend to you.

Best wishes.

Congrats! Glad it worked out so well.

Best wishes.

Great. So what was your money source in the end and how much did you borrow?