All Forum Posts by: Mark Safrin

IMO I would consider a funding offer to an established HML. Especially one that sells their notes quickly so that your return on your investment is churned fast with you getting your cut with each cycle.

Alternatively if you want to hold notes, some HMLs will be pleased to use your money for a special funding program for great borrowers and deals that don't qualify for their normal loan programs for some trivial technicality. They can either do the loan with your money or act as a broker by sending you the qualified customer for a point or whatever you agree on.

I for instance am occasionally contacted through my network (including from Bigger Pockets) by wealthy investors wanting to get into the HML game. I do the "Sergeant Schultz" routine pleading ignorance of the specifics of what we can offer and put them in touch with one of the firm's partners for a chat.

Unless your appetite for risk is exceptionally high, I wouldn't just lend a mortgage or partner for equity to just anyone with a good story and your gut feeling that you should shower them with your millions. Certainly not until you have experience in lending. Go with a HML that already has underwriters and a legal team who vet the the loans, the borrowers and the asset.

Wishing you the best in your future lending endeavors.

Conventional loans are cheaper than HMLs. HMLs are for those to whom conventional loans are not suitable.

Most of our short term HM loans, for instance, are like a cold shower - you do what you need to do (usually purchase, often rehab and flip, or stabilize and refinance), exiting as soon as possible to minimize the loan carrying costs.

For buy and holds that don't want to use conventional loan sources, after any rehab has been done (or in the first instance if no rehab) we often suggest our 30 year fixed, fully amortized loan. Still Hard Money, still more expensive than conventional loans but certainly cheaper than short term loans. For many buy & holds the numbers can work.

Whatever loan you choose, HML or otherwise, once you know the loan terms you have to sit down with the spreadsheet (and Bigger Pockets calculators can help) and make sure that the numbers work for you.

- You should definitely get an appraisal report. If the HML ordered it then they will get it first but should definitely forward it to you. Has the appraiser organised a site inspection with you? If not and t has been a couple of days, follow up. If the inspection has happened, what is the due date for the report? This should have been given to you.

- As for Title companies, if this is a purchase then, at least in my experience, most often the seller will pick the Title company. If the The HML insists on using their Title company as a condition of the loan, I would want to know why.

I dunno... from the very little you have mentioned, I'm not getting good vibes about this HML. Starting with their keeping you informed and updated. Have you asked them for a full list of all the fees you should expect?

We always do hard pulls. 

Happy to be corrected but my understanding is that it only effect your score minimally and that all credit pulls within 30 days count as one pull.

@David Prince Also, I'm not sure if you want to overwhelm every HML you meet with a thousand long documents ;) My recommendation is to have a summary ready and just ask for an approximation of what their rates are likely to be.

You are a Real Estate Investor.
We are Real Estate Financiers.
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Long term Purchase and Refinances of SFR up to 4 units

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Consider asking a couple for their application forms. That should give you the info they required. The chances are that you will still need to fill out the forms of whoever you end up borrowing from.

Include, in no particular order:

- Current credit score

- List of properties you have previously rehabbed, flipped etc...

- Building type/units/use

- Purchase cost.

- As-is value estimation

- ARV estimation.

- Scope of work

- Exit plan.

We don't need an LLC. We need the personal guarantee. It's not one or the other. However anyone not using an LLC (as well as the actual necessary personal guarantee) will be scrutinized somewhat more during due process/underwriting.

I've been approached by large LLCs that own considerable property. Such LLCs that are owned by lots of individual investors, none more than 5% of the LLC. The idea is that none of the owners take personal responsibility. Alas I've had to decline lending on their vast property holding no matter how long they wax lyrical regarding the size and worth of the properties owned. If they don't want to have skin, personal skin that is, in the game then we want no part of that game.

You may ask why then is uding an LLC as well then considered beneficial if you really only need a personal guarantee. Haven't worked that out yet, I'm still learning many things about this trade, but our underwriters know their job and this is amongst their requirements.

Cheers.

Hard Money works by lending on the Hard Asset (usually property) rather than based on your income.

It is almost always more expensive than a conventional loan both in interest rates and in closing costs. On the other hand it is usually more flexible on what property can be lent on and who can be the borrower. A HML will also usually lend Rehab money which many conventional lenders will not and close faster than conventional lenders which can be critical when you need to close a purchase quickly.

A HML is usually a short term loan up to 2 years, though there are also 30 year HMLs as well.

Most use a HML to fund their property purchase, rehab (if any) and then they will have an exit plan (Flip or stabilize and refinance into conventional loans etc...).

Most of all, don't look at a HML as free money. It is expensive money. You use it when you have a great deal that for whatever reason cannot be financed by conventional loans and after properly doing the maths including conservative padding for things that can go wrong

What things can go wrong you ask? Numerous possibilities including: Selling the property takes longer or you don't get the selling price you wanted, rehab takes longer or has cost blowouts, stabilizing takes longer or the rack rentals (look up the term) you factored into your calculations for don't have people lining up around the block for the opportunity.

Best of luck.