All Forum Posts by: CK Hwang

Thanks for the advice Jeff 

The reason I say there is a certain price point were it makes sense for hard money lender is just because I noticed from the stats of our previous projects that the percentage profit margin isn't linear, with the highest margins in the lowest end projects (rough neighborhoods, but being out of our risk tolerance we wholesaled it off) and the highest ends projects (risk of it sitting on the market for a long time). Of course these 2 extremes tend to also carry the most risk.

Let me think deeper into this issue of HML. Thank you once again.

Over the last year, my fix and flip business has grown gradually and it looks like to grow further I'm kicking around the idea of trying to use some hard money to fund more projects and to get used to working with hard money. I was planning to use hard money very conservatively for now, maybe for a start only funding 10% of the project. As such, I did have a few questions I was hoping fellow BP members with hard money experience could answer.  

1. How does one go about picking a hard money lender to work with? Aside from terms and interests rates, is there anything else to look out for?

2. Does hard money work better for properties of certain price points than others? or certain types of properties etc? especially if one was borrowing up to say 70% of LTV? My rough calculation gave me a feeling that HML loans in my specific market was a solution up to about $250K, beyond that, the interests rates as an absolute amount was so high it starts eating up the profits. Anyone has thoughts on this?

3. When using hard money, besides keeping a reserve aside to service the loan, is there techniques one can do to make sure hard money is used safely as a tool?

Thanks in in advance.  

Hey Harith, you should try calling @Karen Margrave and see if her firm is willing to take on the job. She certainly has the team and experience to do new builds. 

Hi Brandon, for my flooring needs, I normally use this company called Mac flooring. They're not cheap but not expensive either. Pretty much dead smack in the middle. They are in Aliso Viejo, family run business. Really like dealing with them since they are really professional and only do floors.

Hi Eric, I'm not 100% sure about variations in title law between California and OK, but yes, you can move a property into an LLC in CA after purchase.

Keep in mind though that it's not easy to find lenders that want to lend on a property in an LLC. Are you paying all cash or wanting to borrow to buy the property? If you're borrowing, or trying to do a cash out, you'll likely need to keep the property in your name until all the financing is sorted.

Also, if you've highly leveraged in this property, the odds of someone coming after this asset would be slim to none since there no money to be had in this property. However, if you do have a lot of personal assets, it might make sense to separate them and keep the fourplex in an LLC. It's hard to tell without knowing your full financial situation.

Another strategy you could try, if you are renting out cheap in a high demand market, is to put the house on the market for the low rent, then ask prospective tenants to give their highest and best rent offer since the low rent would likely attract multiple offers. 

@Logan Allec is awesome at finding good multi families property. He gave me a heads up on one, unfortunately my clients aren't in this area of investing, but you guys should seriously talk. 

@Vicki Gleitz , there is a correct logic to your thinking about renting below market. But just out of interest, if $500 is below market what is market value? If it's just slightly below market value, I find it a good strategy, but i would hand over the cost of garbage and security to the tenant

Currently I've got 2 properties that are being rented slightly below market. However, one of the properties that we used to rent at market price, didn't turn out so great. The tenant didn't really take care of the house figuring if they were paying that much, that everything should be dealt with and so they didn't take care of the house. After the lease expired, we dropped it slightly below market and had a much wider pool of tenants to choose from, so we basically upped the level of scrutiny to pick the best tenant from the applicants and so far it has worked out really really well. 

@Chet Hingle , as many people have already pointed out there is no one fixed return people are looking for. I work with investors who generally are willing to take low returns below 10% and these are the questions they ask

1. What is the quality of my collateral? my clients are ok with lower returns for a beach front property in Southern California, but won't even consider a 20% return in dangerous neighborhoods in Detroit.

2. How liquid is my investment? The more liquid it is, the lower the return they are generally willing to accept.

3. Are there other forces that could affect my returns? exchange rates? tax deductions? capital appreciation? legal fees or the headaches of tax filings etc.... 

I would recommend if you are starting out, either narrow down your definition of where and the type of property you want to invest and find the investor to fund it, or the type of investor you're looking for then seek the properties they will invest in. Without finding a niche, it will feel like you're chasing your own tail because the questions never seem to resolve themselves.

Hope this helps. 

Hi Briar, my opinion is that the deal is too thin to wholesale. I would recommend just selling to a retail buyer.