All Forum Posts by: Patrick Philip

Filtering will save you money.  It's better to focus on the top 20% of the opportunities on your list & contact them more frequently with strategic messages pertinent to their personal situation rather that shotgun marketing a list.

 If you don't have an exclusive right, why would anyone buy through you vs the seller directly?

@Patrick Philip this post is a very common subject and it's totally normal to have this many questions about it.  There are some important concepts to understand when it comes to leveraging your money when purchasing investment properties.  

The first thing I would recommend understanding is that your measure standard for downpayments should be 15%.  You can buy an investment property, that doesn't need rehab, for 15% down with a conventional loan (this is for a Single Family Residence).  Now, you do get better rates at 20%, 25%, etc.  But just keep 15% down in your mind for now.

Second is that you can actually get a conventional rehab loan too.  15% down of the After Repair Value.  The thing to this loan is that it takes 30 days to close.

So what's the benefit to a Hard Money Loan? They can certainly close in less than 30 days. And sometimes we absolutely need to close quickly. But the other benefit is that, in theory, they can get you in a home for 0% down. Most hard money lenders will lend 70% of the ARV. So if you buy a home at 50% ARV, the home needs 20% of the ARV to be complete, what's your out of pocket? Just the lender fees essentially. Which is WAY lower than 15% down.

So let's take an example that comes up frequently: What if you bought a home for $50k, it needs $30k in renovations, and it's worth $100k ARV. With lender fees your total outlay will be $90k or so. Is that property worth buying? Remember that 15% down rule above? If you were to buy a comparable property but complete your down payment would be $15k. Using a HML and then refinancing your total outlay is also $15k...but you have more at risk on the home with renovations. So with that home we either need to reduce our offer or see if there is a way to reduce the renovations. Otherwise, just buy the completed home and save the headaches! I hope this makes sense. If you think this is helpful to others then feel free to vote on it and ask any further questions. Thanks!

Well the 75% would be just a rate term and would include no cash out. The highest we would go would be 65% cash out and you would bring nothing to the table. Just on the date of close go to the closing agent and pick up the check.  I understand what you are saying but in the even that you default on the loan, the lender still has to have a certain amount of equity as security in the property. 

I'm speaking strictly from a HML point of view who operates in Florida. There are a lot of different types of lenders out there but we are pretty conservative until we build a relationship with our borrowers then we can adjust the terms accordingly but not everyone out there does that.

If you go through a traditional lender then yo are looking at a lengthy process and a lot of paperwork, tax returns, bank statements, etc, and a lot aren't investor friendly. The good thing about private money or HML are that we cater strictly to investors and understand about the growth of our clients businesses.

Hi Patrick, our basic concept for Florida consist of 65% cash out or 75% rate term refinance. 90% will be very rare in the hard money field and if you do come across it then tread carefully and never pay upfront costs besides an appraisal or BPO fee.

Hi @Patrick Philip,

Here are your Fannie Mae and Freddie Mac LTV matrices, current as of this post.

When you find someone local to Florida (assuming the property isn't in Nebraska or California, in which case you should find someone in one of those states) that matches the higher of Fannie or Freddie for your scenario, that's as high as it'll go before it's a portfolio product with some combination of being an ARM, having a staggeringly high rate, and/or costing multiple points up front.

Hi @Patrick Philip,

Here are your Fannie Mae and Freddie Mac LTV matrices, current as of this post.

When you find someone local to Florida (assuming the property isn't in Nebraska or California, in which case you should find someone in one of those states) that matches the higher of Fannie or Freddie for your scenario, that's as high as it'll go before it's a portfolio product with some combination of being an ARM, having a staggeringly high rate, and/or costing multiple points up front.

90% LTV seems aggressive. I have experience where local lenders and credit unions can reach there, but never seen higher than 85%. Try those first.