All Forum Posts by: Ryan Blake

@Trent Danelski Happy to hear you taking the first steps! Great job finding a mentor! That is a nice first step. The market is hot so deals can be hard to find but don't stop looking, they are out there. Hope to see you at some of the meet ups once they fire back up.

@Allison Christine Great questions here.

First off, not sure if the $20k will be enough or not. It really depends on the area and grade of home your are looking for. If you are looking for a duplex in an A class neighborhood, it may not be enough even in the cheapest markets. It will also depend on the reserves your lender may want to see. I am always wary of borrowing money out of a family member or friends 401k. That can go wrong in many ways.

As for Hard Money vs FHA. Hard money offers will almost always look more attractive in that they are same as cash financing and can close quick without required inspections and the like. The downside for househacking, hard money lenders are NOT allowed to lend to owner occupied homes because they do not confirm to Dodd/Frank lending laws. Most lenders will make you buy in an LLC so that it is not officially owner occupied no matter what but will make it a little more difficult to do a refi into long term debt or they will make you buy in your name but sign an affidavit that you will not occupy the home. FHA loans will fund some rehab amounts but mostly cosmetic rehabs. If there are structural issues, it will be VERY difficult to close in an FHA loan. It does allow you to get into the loan with just 3.5% down which is very nice and has a low interest rate right off the bat.

Good luck with this search. I hope my thoughts help a little.

@Jon Shoop I agree 100%. Get a GC who is insured. They may cost a bit more but I am sure the quality of work will be much better. I have seen so many properties sit on the market or sold at a loss because people cheap out on the contractors.

@Michael H. Not to say your GC won't do a great job. It just tends to go smoother with someone insurance who pulls permits for at least the big stuff.

Best GC that I have been using is @Jason Coyle (does work all over the metroplex but based in Tarrant County)

I have had good luck with @Kyle Mccaw.

Also would recommend @Sherry Patterson.

@Angelina Essuman That is a great question. I wish I had a better written out response for that but here is my stab at it.

Do you lend directly to an LLC?

Some lenders will lend directly to an entity if you add in a personal guarantee. Others will not lend to an entity at all. See what is possible.

Do you allow transfer of deed from a personal name to and LLC?

You will want to make sure you can hold your rentals in an LLC. Liability protection is key!

Do you offer refi/consolidation of loans?

This isn't key until you have 5+ rentals. Then you will want to start thinking about packaging loans in to bundles that will be held with one commercial note. I am not a long term lender but I believe Fannie Mae limits the number of loans an individual can have to 10 (this would include a primary residence). This is just for conventional government backed loans. There is no limit to private mortgages.

I know there are tons more great questions to ask and I hope that some more qualified long-term lenders can come along and offer their advice.

... Hint Hint @Andrew Postell

@Quentin Davie Can you elaborate so we can all learn? What was your experience? I know they charge a $3,000 fee that is for "access to their education" that can be applied if you get a loan approved. Is that where this stems from? I would ALWAYS be careful with any lender that requests a commitment fee of any size especially over $100.

@Nagendran Manidas This is a much bigger issue than most people realize. That is why it is nice to have the option to close in your personal name. My guess is most people using the HMLs that require the LLC are not refinancing or have established the LLC enough to get a commercial line of credit with or without a personal guarantee. @Wayne Brooks

@Wayne Brooks is correct as to why many lenders will prefer the LLC, to keep it from being owner occupied. The companies that do not require an LLC will normally make you sign a document at closing stating that you will not owner occupy so that it can mostly absolve the HML of liability if you choose to break your word and move in.

@Doron Mizrahi For your price point you are going to need to look at 2/1 properties probably under 1,000 sq ft. On the Tarrant County side look to White Settlement and the Stop 6 area of Fort Worth. In Dallas county look for properties out on Military Parkway and Buckner on the Southeast side or South Dallas/South Oak Cliff area.

Warning, these are all neighborhoods that are high in crime and tenant turnover. Know you will have a higher chance of late payments, squatters, and damage to property. All that being said, you can make a decent return in these areas.

@Travis Fairbairn I like the River Oaks area more as rentals. If that is your strategy. You are right, Castleberry ISD is a downside to the area. I say this as one of the founding members of the Castleberry ISD Education Foundation. The district is impoverished and every school in the district is on Title 1 funds. That all being said, it is great for rentals and so-so for flips.

@Jamal Fontenot All HMLs will have an LTC number (the loan to cost that they are willing to fund upfront). Most companies will be between 85% and 100%. You can get 100% financing on your deal. They will also have a maximum LTV (the loan to value that they will cap out at). Most companies will be between 65% and 75%. You can get up to 75% of the ARV in your loan.

Example of terms: If the LTC is 90% and the LTV is 70% on a deal with a purchase of $50k, repairs of $25k, and ARV of $100k the deal would look like this:

MAX Loan based on LTC: 90% x $75k = $67,500 You take your total costs (purchase + rehab) and multiply it by the LTC number (90%) = your max loan based on LTC.

MAX Loan based on LTV: 75% x $100k = $75k You take your ARV and multiply it by the LTV number (75%) = your max loan based on LTV.

Every hml that I know of will do these calculations and then lend to you on the LOWEST of these two.

I hope this example makes sense. If you have questions, post in the thread. Me or others that know even more than I can chime in and help.