All Forum Posts by: Ryan Blake

Quote from @Kannon Vogt:

Hello all, I'm currently residing in central Texas and looking for advice when looking to find my first investment property to get started off on the right foot. I'm 21, newly married, and we have a 2-2 house we're residing in as of last July. I put roughly 20% down on a $200k home, and am curious what steps I could take to possibly turn my original investment into a large portfolio within the next 10 years, when we're currently "low on liquid funds" after finishing up a wedding.... We're currently both working a W-2 job with a combined household income of roughly $150k, and searching how to start to our journey to financial freedom. Any advice would be appreciated, as I am again, very new to my journey in finding my way through the "rat race". 

Some questions I've been asking myself that you might be able to help me answer.

"What is a realistic goal to have within the next year, in order to build cashflow?"

"In this economy, what should I be physically looking for in a potential investment property that is "promising" or "trendy" that would give me the most ROI?"

"Since I am strictly W-2, would it be smart to consider getting my LLC in order to protect my future investment properties, and while also reaping the tax benefits of having an LLC?"

"What are the main differences in hard money lenders vs. private money lenders?"

"Is real estate wholesaling a realistic way to start up my real estate journey, and if so, how can I get started in this field?"

"Where can I find owner finance properties?"

"What formula is used when calculating price of property + property taxes + expenses and upkeep - what property will rent for = monthly cashflow?"

I'm hungry to learn, and work. I want to know any and all tips, advice, and of course down sides to this lifestyle. 

Thank you,

KV

Below are my answers to some of your questions that I feel qualified enough to answer and then some of my personal thoughts on where to go from here.

"What is a realistic goal to have within the next year, in order to build cashflow?" With out knowing your actual cash position, it is tough to tell. I would think that you should be able to pick up at least one rental in the next year. The issue you will face is how to make it cashflow. You will need to find a home that has a lot of upside potential and then find a hard money lender that is working in the San Angelo area. Because of the size of the market it may be a little more difficult to find favorable terms from an HML. I am sure some other lenders will respond or reach out after I make this reply.

"In this economy, what should I be physically looking for in a potential investment property that is "promising" or "trendy" that would give me the most ROI?" Trendy will not get you more ROI. I think you need to find a property that is being sold significantly under retail to build in a lot of equity. You also may need to do some work yourself, again depending on your funds. One thing that may work is doing a Subject to Existing Financing deal where you will buy the property from someone but not payoff their loan. Then you will take over the payments. But they may want a large payout to buy it from them and it may need repairs that could need cash out of your pocket. Look to ask the seller about financing back whatever they want for their equity but make sure the mortgage rate and payment are at a place where you will be able to cash flow effectively. Search up Subject To in order to find more info on this.

"What are the main differences in hard money lenders vs. private money lenders?" Really, any hard money lender is also a private lender. Typically people making the designation a private lender is someone you know and have a relationship with and will privately lend you the money. A hard money lender is the same but they advertise or open it to people they don't know, meaning public. If someone you don't know reached out to you to offer you a loan and you do not know them, they are essentially acting as a hard money lender (lending based on the hard asset and not a prior relationship they had with you).

"Is real estate wholesaling a realistic way to start up my real estate journey, and if so, how can I get started in this field?" Find properties off market is the quick an simple answer. Find a property (truly on or off market) that has enough room in the deal and get a contract on it. Then sell your equitable interest in that contract via an assignment to another investor. You will want to make sure you have enough room for your profit and to still make it enticing to an investor. In Dallas, investors are regularly getting deals around 70% to 74% (that is the purchase + rehab / ARV). This will only be making you quick cash, not long term investments.

"Where can I find owner finance properties?" Zillow, For Sale By Owner posts on facebook, your local newspaper, and craigslist.

Wish you luck in your venture. Make sure to keep your eye on the prize and do not spend too much time chasing after the next hot thing.

@Anxhelo Lalaj I have a list of DFW wholesalers. Either shoot me an email or a private message and I can send them over. I am in the process of validating the list, something I do every year, but have it mostly completed for 2025. It has about 75 wholesalers on it.

@Mike Klarman Really? That might be regional. I have written 29 loans this year and the average Cost vs Appraised ARV is 69.6%. There is a high concentration of those in Texas (about 2/3) but it is relatively similar in most of the markets we lend. We lend up to 75% of the ARV but most people are buying and rehabbing well below that from the investors I have been working with.

@Malachi Gutt Hi Malachi! I have been an investor since 2009 and work as a loan originator since 2018 all in Dallas. Would love to connect if you have any questions.

@Mike Klarman Great advice on that. I would say for a lake front you may even want to keep it close to 70% because of possible holding time.

@Rick Zink I also wanted to share with you some key questions to ask a lender when you are looking.

Are you a direct lender?

This will be a gateway question. If the answer is no, that means they are a broker of some type. Typically this means they will take longer to close, may not have all the information for the companies they work with, and most hard money brokers get their money by taking an existing product and adding extra points to pay their fee.

What is your investor success rate?

Another way to ask this is what is your default rate. This is important to know. Many don’t track this statistic as closely as they should which is why many lenders go under. I think it is probably the most important stat. You want to make sure they are at or below 5% to make sure they are able to stay solvent. You don’t want your lender to go out of business while still holding your construction escrow funds.

Can you provide me with the contact info of some recent borrowers?

Any good HML will be happy to share the contact info of borrowers so you can see how easy the process was and how well they treated the investor.

Can you share a recent closing document or HUD?

This will show you more evidence of the fees they really charge. Not all lenders will share this as they will need to get approval from the borrower before providing. If not, at least make sure that you get a term sheet. This should put in writing what the fees will be.

What is your maximum LTC and LTV?

LTC is sometimes referred to initial funding. This is the percentage of costs (purchase and rehab) covered by the loan. A general range tends to be 85% to 100% covered. LTV is normally expressed as a percentage and that percentage is of the ARV. A general range tends to be 65% to 75% of value. Lenders will lend the lower of the amount between LTC and LTV.

Do you require an appraisal and survey?

Most HMLs will require these. I am wary of the ones that don’t require an appraisal. Lenders that don’t require an appraisal will perform a desktop appraisal but will typically have a very conservative view on the value of the property to protect the company’s investment. This means you will be coming out of pocket more. Survey is a toss-up on whether or not it will be required. Know that every long term lender will require a survey and if something comes up on it when you are trying to sell or refi, you could get stuck in hard money without an easy or quick way to get out.

Is there a pre-payment penalty?

Some will require you to pay the interest through the term or another length no matter how long you hold the loan. Just make sure that you include this requirement in your costs.

What is your draw fee & benchmarks for the repairs portion of the borrowed money?

Know what your fees will be to take out the repair money borrowed. Draws are almost always held back until you reach certain points in the project or that work is completed. They will also charge you to have an inspection by a 3rd party or to use an app to make sure the work is done. I have seen this range from as low as $100 up to $300.

Do I need to pay anything before sitting at the closing table?

There have been numerous people on BP talking about how they paid application fees but they could never get their loans closed on any deal brought to the company. This is a practice by some less than reputable companies. One I saw charged $500 upfront to be pre-approved and would never actually fund any loans. Just beware. Most reputable HMLs will not charge anything until you are sitting at the closing table and all fees will be listed on the HUD-1 closing document.

And of course, what are the points, interest, and attorney/document/admin fees for the loan?

This will vary based on region but in general 2 – 5 points, 9% - 16% APR (meaning this is the annual rate so divide it by 12 to get the monthly interest amount), and documents fees can be from $600 – $1,900. The document fees are what will vary wildly from company to company. Just know them going in so that you can properly budget. You will also want to find out if payments are interest only or if some principal is built in. Most hard money will be interest only payments on the full approved balance of the loan whether or not if you have pull the draw funds for repairs.

If you have any other questions, post them in the same thread below so that we can all learn from the answers.

@Rick Zink I have a couple resources to share.

Every HML will work somewhat different but here is the standard flow:

1) Get pre-approved with an HML - This should be free. DO NOT PAY AN APPLICATION FEE. This is a sign of a possible scam.

2) Look for a property and get it under contract.

3) Request a quote or term sheet from your lender. Try to do this BEFORE you put any earnest money down. Make sure their fees work with what you are looking for and that the address is conforming to their underwriting needs.

3) Send the executed contract to your HML. They will let you know what other paperwork may be needed and probably order an appraisal. I am always skeptical of the HMLs that don't require an appraisal. An appraisal is the only thing you should ever pay for before you close the loan. It will help ensure you have a good deal and that your deal makes sense. No lender will lend on a deal that doesn't make sense.

4) After the appraisal comes back you will get a document that outlines the amount to be borrowed and all fees that will be relating to the loan (I would suggest to ask for an example of this document when you are searching for an HML so you will know what fees are going to show up).

5) Close the loan at a title company of your choice.

6) Begin work and make draws on any repair balance. Most HMLs will pay for work completed. To have the funds released you need to have a third-party inspect the house and the repairs made or provide pictures and receipts. Then they will release the funds based on what is finished.

7) Sell the home and payoff the loan / rent the home out and refinance the borrowed amount.

Hope this helps give a simple time-line. If you are looking to do a refi at the end of the hard money loan, I would suggest lining up that refi company at the same time you are looking for hard money. Your HML may have a company they work with frequently that will make it a smooth transition so ask.

@Cameron Husom I have a list of meets up that I attend along with a list of local wholesalers in the DFW area. I can send you over the list if you would like. Most of the meet ups I go to are in Tarrant County.

@Stacy A Stewart Welcome to BP. Love the Macon and Atl area. Awesome job with getting a cash flowing property! that is amazing. Good luck with your continued journey. Feel free to reach out if you ever have any lending related questions.

As a property owner, I get a lot of these calls. Daily. I also report every one of them to https://www.donotcall.gov/report.html#step1. I know there is some back or forth on whether these are considered an unsolicited sales call or not. But the VAs just don't work. Too many people doing the same thing doesn't land strong results. Text messaging is probably the same. I think the cycle is now back to door knocking, direct mail, and bandit signs. But it will go back to calling when the fad dies down and people are getting fewer calls and it will become profitable again.

AI texts are still pretty easy to ignore. I know you are pitching your program or software that you want to sell, but I don't think it is really solving the personal contact problem. I do agree it will probably work better than a barely-trained VA but it still will have varied results.