All Forum Posts by: Ryan Blake

@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.

@Account Closed is an amazing lender that works on the west coast and has been a podcast guests a few times. He has been investing for years. From the lack of info in your profile and your new account doesn't build confidence in who you are. You may truly be Robert Berg, managing partner at Xpress lending but it would be very difficult to verify.

I work with a lender that has been around since 2008 and has never charged up front fees. You say you do commercial lending. We are talking about fix and flip loans in this context not just pure commercial lender. Hard money lenders are not charging a a commitment fee as a whole. If you are unaware of this then I would say you should preform a SWOT analysis for your company as you are not looking at your competition as a whole. My advice that MOST hard money lenders do not charge an upfront fee is very factual and verifiable. It is NOT the norm to charge a commitment fee. I never said  you were a scam and find it odd that you would personally attack people on this site for saying that your company is doing something very openly against the norm.

Some other investors said they felt the program was fishy. Not me, not anyone who didn't know anything about your company, but someone who didn't feel comfortable about moving forward with what you had to offer. Instead of finding out WHY they said this about your company you choose to attack them. Very strange. If I was a managing partner I would want to contact and interview someone who felt that way, not belittle them. I would want to know why they didn't feel comfortable borrowing from me.

In the end, I think you are going about this very poorly and it looks bad on you and your company.

@Lerone Blatch I suggest you start with reading up on some blogs/articles on this site. Free, pretty reliable, and quick. Then I would move on to books. I think a great one is Flip: How to Find, Fix, and Sell Houses for Profit. That is has been a tried and true resource for many flippers over the past 20 years or so. It is updated every few years so it remains current. There is also a great store on this site with book offerings. The final step (this would normally be one of the first steps but not with COVID) is to attend local meets ups. Not sure what Delaware is like but Texas is starting to have meets ups again. Network but know that there are a lot of snakes out there who will pretend to be big time flippers when they maybe struggled through one deal. Just be sure with all the info you get from podcasts, books, and especially from networking and forums, VERIFY. You need to double check everything. Never just take someone's word.

I wish you luck on your adventure and hope you get started well.

@Jamal Fontenot You should be able to still borrow on another property. You just need to find a 100% LTC lender. The Houston area is hot right now but prices haven't overtaken rents just yet (like they have in most of DFW). The refi may be a problem. Also, FHA is meant for owner occupied homes or homes that you intend to owner occupy. Just be careful about what you post as there could be mortgage fraud.

@Sandy Sawyer is right about cashout refinances needing a 6 month seasoning period. However, if you use a 100% LTC lender, you can just do a rate and term refi without any seasoning needed (you can't take cash out form the closing). The idea would be if you didn't make a down payment and you only paid the loan fees, title fees, etc at closing and only hold the property in the hard money for 2 - 3 months then you should have very little invested in the property, say around $10,000 on a property with an ARV of $180k. This doesn't fully fall into Brandon Turner's BRRRR because you still have some money left invested in the property but it at least leaves you with very little left in it and a long term note after just 2 months into the hard money loan.

@David Taylor I agree with @Rick Pozos on this one unless you are doing this as a rental. Then it really doesn't matter as much to how much you have invested (just never be upside down on it) because you need to focus on your cash flow to determine if it is a good deal. If this is a flip, I would get out of it. I know every market is different but here in DFW I don't buy flips when my hard costs (purchase + rehab) are more than 75% of the ARV. Even then, I prefer to be at 70% or below. Every investor will have a level they are comfortable with you. I just don't know many that are comfortable with anything above 80%.

@Sebastian Chaco I don't know of a good lender in the area for you. Sorry.

But...

After finding an HML that will lend where your prospect house is (most will only lend in major metro areas or have steeper rates if they do lend outside metro areas), I would ask these questions:

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 of 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. Only continue on if the answer is yes. The person you are speaking to should have an email address with the name of the company and work directly for that company. Otherwise you could be getting yourself in to a bad situation.

What is your investor success rate?

This is important to know but can be lied about very easily. Many don’t track this statistic. I don’t know if it is because they don’t really care or just haven’t thought of it. I think it is probably the most important stat. Look for groups who offer referrals to local contractors, Relators, etc. Also, look for groups that have boots on the ground in each market that know the specifics of investing in that area.

How many loans have you closed in this month?

Any good HML will know this number off the top of their head. You want a lender that is busy and closing loan in your area. Who cares if they closed 100 loans in other states, find out what they are doing in the same area you plan to be. If they are closing a lot of loans, they probably have something good to offer. A good number will vary based on the current market and the size of your metro area.

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.

What is your maximum LTV and Initial Funding?

This is normally expressed as a percentage and that percentage is of the ARV. Most companies are between 65% and 75%. The higher the percentage, the better for you. That means they will lend more. Initial funding levels are a back way of putting the down payment required. If a company says they have 85% initial funding or LTC, what they really mean is they are going to require you to pay 15% of the purchase price as a down payment on top of the closing costs and LTV requirements. Right now most HMLs are between 85% up to 100% initial funding. Initial funding of 100% means there would be no down payment.

Do you require an appraisal and survey?

Most HMLs will require these. I am wary of the ones that don’t require an appraisal. The lender will perform a desktop appraisal but they will typically have a short view on the value of the property to protect the company’s investment which means you will be coming out of pocket more. Small-time HMLs may not require an appraisal but this could be because they will drive out and view the property themselves. Survey is a toss-up on whether or not it will be required.

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.

Do you have relationships with refinance lenders?

Make sure that they have a good relationship with companies that will refinance the loan for you if you are using a BRRRR method. You want to see something that has low or no seasoning for a cash out refi or that may require low amount of documents.

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 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% - 14% 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.