All Forum Posts by: Fernando Angelucci

@Joe Fairless Hello Joe, thank you for the welcome. Got to say, I love what you are doing with your podcast, keep up the good work!

I don't really look at which one is the "most profitable" in and of itself but rather which produces the most passive income with the least amount of liability and daily involvement.

The lending business is great because I do not use any of my own funds, I am in the safest part of the equity stack, the investor takes all the risk with the rehab, and does all the work. 

The real gem of lending is rehypothecation. The following example will show why:

Let's say I have a capital source that costs me 10% APR from Larry the Private Lender. I take 50K at 10% and lend it to a Frank Flipper at 12% and 5 points for 6 months. I am able to turn my money twice a year, so therefore, I am making 12% and 10 points = 22% a year. So I am making a 12% spread or $11,000 - $5,000 = $6,000 a year. Not bad but not great. Here is where the magic happens.

When I lend Frank Flipper the 50K against his property that is currently worth 80K, he gives me two things, a Promissory Note (IOU) and a Security Instrument that secures the Note (Mortgage or Deed of Trust). I can then take the Security Instrument to Paul the Private Lender and say, "Paul, I have a 50K Mortgage on a property worth 80K and once it is done it will be worth 160K, are you willing to lend me money in exchange for holding this Mortgage?

The nice part is the new lender Paul is not looking at my credit profile or reserves, he is looking at the borrower who is on the Mortgage, Frank.

So Paul the Private Lender says absolutely and lends me 50K at 10%, I then go out and lend it to another flipper at 12% and 5 points and turn it twice in a year now adding another spread of $6,000 profit a year to get to $12,000 a year total. Again, not bad but not great. But then I can do it again with the new Mortgage, and again, and again.

I know Hard Money Lenders that rehypothecate their loans between 10 to 20 times. So imagine I do it 20 times to really drive the point home. I now have $1MM at 10% and am making loans out at 22%.

That is 220K - 100K = 120K a year in spreads from starting with just one 50K loan at 10% APR... Amazing! This is how the 0.1% of the US make their money, they are called banks.

Now say I spend $3,000 to get the entity formed and to have my team put everything in place before my first loan, because after my first loan, the borrower pays for all of my expense, including appraisals, BPO's, Prelim Title Reports, etc.

120K on 3K in the first year is a 4,000% Cash on Cash Return. All while shifting all the risk to the borrower, using other peoples money, and not using any of my own credit...

I apologize for the long post, but this stuff gets me jazzed up and I think everyone should know about this.

Cheers!

@Chris Soignier Wendell, that is fantastic news. I am buying almost everything you mentioned. The only things I am not currently buying are industrial land, retail space, and office space. Everything else is right up my alley. What areas do you find these properties?

I see you are from Downers Grove. I basically grew up in the Main and Ogden area! Go Trojans!

@Brie Schmidt That is fantastic! What is the size of your current portfolio? What types of properties do you look for and how do you evaluate them to decide if it is a good deal or not? Thank you for the recommendation! @Wendell De Guzman How long have you been in the Self Storage Business?

@James Wise Thank you for the kind welcome! How is Cleveland treating you these days?

@Brie Schmidt Hello! Tell me about your operation, anything I can do to add to your business? We are constantly looking for Self Storage and MF in Chicago. Have you seen anything good recently?

@John Rogers Thank you John!

@Jerry Stanford Hello Jerry! I am always looking to connect with investor oriented brokers. Anything I can do for you?

@Jeff Goedeker Hello Indy! Jeff, tell me about your operation? Where do you focus your efforts in Indy?

@Renea Steward Hello and thank you for the advice, you were right, they have everything in there! What parts of Chicago do you focus on?

@Sterling White I do have property in the Indy market and am about to add much more to our pipeline. We are currently getting two apartment buildings for sale. We will also be sending out a 15,000 piece mailing campaign to the Indy market here over the next few months. Should be great!

@Cynthia Scaife Hello! I love Texas! We will be expanding our operation to DFW towards the end of next year. Any tips?

Cheers!

Hello BP Family!

My name is Fernando Angelucci and I am excited to join the community.

Here is a little about me and what I want to accomplish:

In my lending business, I will be increasing my portfolio to $20M in capital within the next 5 years to grow Titan Capital into a private investment fund. I then look to grow my fund into a $100M fund within 10 years to parlay the growth into the banking industry.

In my self storage business, I am focusing on acquiring an additional 40 self storage facilities in the next 10 years with the goal of either taking Social Self Storage public or being acquired by a self storage REIT.

In my real estate investment business, I will be growing my portfolio to include an additional 500+ units in the next 5 years to hedge against inflation and to balance my lending business.

In my wholesale business, I am currently working on automating the Chicago and Indianapolis markets to completely remove myself from the business within the next 18 months and will be scaling up to 10 properties sold per month per market.

I am always looking for solid long-term business relationships, be it with experienced real estate investors who are in need of capital, equity partners looking to get a solid return on their money, strategic joint venture partners who are growth oriented, or foreign investors looking to hedge their U.S. currency holdings against inflation through the acquisition of U.S. cash flowing assets.

Shoot me a line and lets start making some money together! There is more than enough to go around!

Cheers!

Hello Jeb,

Let me know who you find. I have two apartment buildings I need to sell just outside Indy.

Cheers!

Hello Shane,

If you want to increase your chances of getting a loan right off the bat, move somewhere else. Due to usury laws hard money lenders cannot lend on Owner-Occupied properties. If you can do this there may be lenders that are willing to take a junior position but the interest and points are going to be astronomical if you can even find someone that will do it. If you have room in your profit and it is rock solid, that may help, but like you said, you need to get on the phone and explain everything so that you don't get a default no.

Feel free to PM me if you want to discuss. I may be able to connect you to some lenders that might have interest but be prepared to pay 18% and 5+ points for a loan in a junior position.

Cheers!

Hello Jai,

Before searching for the national guys, I would recommend going to your REIA and asking for their member list to see if you have any local lenders. Can you elaborate on the deal numbers as well as your borrowing strength?

You may be able to get away with a conventional loan or construction loan from a local bank that will seriously increase your profitability. If you cannot get a conventional loan, then you may need to look for private money or soft money. If those don't work then look for a Hard Money lender the will lend based on the strength of the deal and not necessarily on the strength of the borrower.

If you have exhausted all of your options I would be willing to lend if the deal was solid.

Cheers!

Hello Jerod,

I would go in at an offer of $43,500 and get a contractor to give you a fixed bid on the high side to provide to the listing agent. Can you elaborate more on the deal, who is the seller, individual or institution? Why are they selling? How long has it been on the market? 

With a 790 credit score and $48K in reserves, why don't you get a conventional loan or at least go for soft money like Lima One Capital's Rental30 or Fix2Rent product which would come in much lower than your 12.75% and 2 point HML? Hard Money loans are asset based loans and you do not benefit as much when you are a great borrower such as yourself. Go to a few local banks (in person, do not call), and ask to sit down with a banker and paint a picture of a long term relationship with the bank and see what they will do for you.

As for HML, that rate is actually right in the ball park. I have paid as high as 15% and 5 points for a 6 month loan and as low at 10% and 2 points. In my Hard Money Lending business, I charge 12% and 2-5 points. So I would say keep this Hard Money Lender close for the day that you run out of conventional mortgage slots.

Can you go a little more into your HML and what the requirements are? Do they have a loan-to-cost ratio that they will not go above? Usually they would want you to have skin in the game on the purchase side.

What are your expenses specifically? I like to break them down into Taxes (Actual), Insurance (Actual), Maintenance (12%), Management (10%), and Capital Improvement Reserves (7%) to find your un-leveraged return as a measure of the strength of the deal, then add in mortgage expense to find your Cash-on-Cash return. Two important metrics to use would be Break Even Ratio and Debt Service Coverage Ratio.

Hope this helps!