All Forum Posts by: Stan Hill

Leave it in the SDIRA and take distributions if you need it as needed. If you take it all at once, you will likely have a higher percentage tax hit.

@Michaela G.  I appreciate your comments on helping the street. We own a rental and an extra lot on a small residential block and neighborhood. Circumstances dictate we not put much if any money into the rented house. Our plan is to spruce up the rental when the current tenants move out and build a house that's one of the nicest on the street. You've validated my hope that it will lift things up a bit. 

I also figure it will be easier to lease out a house that's one of the nicest- though not THE nicest nor the biggest.

Wow Shanna, nice deal. Wish I lived out that way! We're not ready for the long distance thingy.   :(

@Account Closed

Nice place... nice numbers, great job! And yes, people here get excited to hear this stuff!

Nice job, especially the kitchen.

Wow, I wish we had margins like that in DFW!

Not enough information to say.

@Account Closed  I didn't get a GFE. Lesson learned. I went into this barely OK with 10% and 4 points. The additional $999 underwriting fee and other fees made it ridiculous in my view. I hope I don't need these terms again, but am grateful it is there if really needed.

@Rajib Miah  I thought of backing out. The thing is, as with most flip deals, a non-refundable deposit was put down. As the finance company is a sister company of the seller, I doubt they would have given time to get alternative financing. Also, being in this with a partner made that a little more difficult. The way I see it, this is precisely what I wanted it to be and will continue to be: a learning experience.

@Jon Klaus  Definitely a learning experience, Jon. I sold mortgages back in 2001 - 2003. I felt like a sub-prime loan customer they way they got so fee happy. I already have one sibling interested in a 12% return, no fees. Good for her, good for me.

I am planning to get a handful of flips under my belt and then hopefully find even more options. I will package each accomplished deal: summary page, HUDs, before and after pics, bills for rehabbing, etc. I am hoping to generate some cash with some well put together deal packages. I need to shop around for a bank. I just listened to the podcast you were on and you reminded me of how a good relationship with a bank can be helpful in many way.

Welcome Gerry! I grew up in the valley there, have a lot of family there and miss it. Do yourself a HUGE favor and go snag the podcasts. I like listening to them, and it beats listening to the news or other nonsense that just gets us pissed off.  You will really learn a lot.

And to suck up to Brandon Turner and Joshua Dorkin just a tad, they keep it light and just the right amount of humurous- all while extracting tons of great info from their guests.

Well, it's kind of a flip. We are the financial partner with an experienced buy and hold rehabber. After the rehab is done, we have a few ways of exiting. We are very excited and glad to be doing business with her here in DFW. This is the first of what will hopefully be hundreds of transactions of a combination of flipping and buying and holding rental properties.

I want to share my experience with the hard money lender we dealt with, and see if what I experienced is common. First off, I want to say that everyone I spoke to at this lender was polite, courteous and helpful.

When I established contact with this lender, I was told that my rate would either be 9.99% or 11.99%. The rate was to be determined by our cash reserves. Over $100,000 and it's 9.99%. I asked if retirement plan money counted, and was told 60% went toward that $100k benchmark. We easily topped that. FICO, mid 700s, $450k+ net worth, low debt ratio, four pieces of real estate held free and clear, no other mitigating factors. 

Fees: I was told 4 points and a $999 fee to cover the survey, termite inspection and appraisal.

Now what actually happened at closing: the $999 fee was NOT for the above mentioned items. Those were listed separately, and the $999 was listed as an "underwriting fee" at closing. Wow. So it morphed into 4 points and $999 in fees- on a loan just over $60K I was looking at $3,519 in fees, not including the survey, termite inspection and appraisal. Pretty big bite. I instinctively grabbed for my wallet at that point and braced myself.

Then came the interest rate- not 9.99%, but 11.99%, which meant an additional $102 per month in interest. I stopped the closing right there, called the loan rep and grilled him pretty hard. He stated that the money in retirement plans didn't count towards qualifying for the interest rate. Huh? When I asked about it (admittedly it was two other employees who told me about the $100K and 60% thingy on retirement plans), the specific context was qualifying for the rate. Frankly, I think I was intentionally deceived by the two different employees who explained the rate. I am a pretty simple person. If one employee deceives, I assume it's the employee. When two use the same tactic, I assume it's a company policy to deceive. I am pretty straight forward. If you say you are going to charge X for Y, I expect to be charged X for Y. Is that too much to ask? He said he'd call the boss and get back to me. We continued with the other documents. 

Loan servicing fee: $30 per month! Wow! And for $30 per month, we got some nice coupons to cut and send with our payment. Impressive.

Escrows. Huh? Escrows on a 70% LTV flip loan? Seems odd on a loan less than 80% LTV, on an item likely to be credited back and forth on the transaction(s) coming soon and probably never actually paid out. On the other hand, we're getting close to the end of the year. Ummm.... OK. Whatever.

Rehab money. None paid out to get the job going up front. So now I'm looking at fronting $6K. Oh but they do charge me the full 11.99% interest on all of the $25K in rehab money, since they have the money set aside for me collecting interest for them in their account. I suppose my paying them 11.99% is the least I can do for such a courtesy. How quaint. Speaking of rehab money, if this full $25K rehab goes beyond 30 days, I will pay a $350 penalty for being such a slacker. I mean really, what kind of loser can't do a full rehab in 30 days, right?

By now, I wasn't surprised that the property didn't come with mineral rights. At this point, it felt like the company in question bends the customer over, slaps them around and penetrates every possible orifice as deeply as possible. Clearly if the company comes across a property with mineral rights, they'll keep that for themselves along with absolutely every molecule of blood and oxygen possible.

So after sitting at the Title company for an hour, I get the call from the loan guy. No surprise. It's tough luck for me. 11.99% stands. I can't say I was shocked. But I really did appreciate what appeared to be a good effort.

Oh and that survey I paid for? I'll look one more time, but as of now it appears I don't matter enough to get a copy of something I paid around $300 for. Nice parting slap in the face, guys. 'preciate ya.

Now you may be shocked to hear this, but I'm a little bitter about the experience. I understand we are all in this to make money. That said, this transaction included two of my pet peeves: deceit and a company being outrageous with charges just because they can.

So now I am reminded of the old saying, "necessity is the mother of invention". I am thinking of people I know who have money and/or their friends. This is my first flip, but I refuse to believe that this experience is the way it is. For such a safe transaction from the lender's standpoint (of course I acknowledge there is risk), overall I think the dishonesty, terms and bloodletting are inappropriate and even petty. I don't treat people like that, and I expect the same from others.

Fortunately, we can do a few transactions like this simultaneously with our own money. In the mean time, rest assured I will be looking for alternatives. When I think of my goal for next year, to do $300-$400K flips, and I think of handing over $30K in fees and interest, not to mention the minor yet annoying pinches and slaps and whatever other surprises they'll think of by then, I know I have to find an alternative. Is there one? Two? Or is this just the way it is?

Now all this said, we are very excited to be doing our first flip. We really like our partner and how she has handled things thus far. I know she will do well for us all. We will likely do another one or two properties or who knows, maybe more properties. 

And hey, I was able to laugh out loud when, as we walked out of the title company, my wife joked that now she knows why they're called HARD money lenders- as we felt like we'd been ridden pretty hard.

If you've read this far, you deserve a medal. So of course, I am interested to hear peoples' thoughts and experiences on hard money lenders.