All Forum Posts by: Tim Crosby

Ok, so good news first! I've recently been in touch with someone who's willing to fund about 50% of the purchase price of my next investment property! It's great, but it also leaves a significant portion of the deal unfunded. Ideally, he would just give me that money and I could go to another lender and say, "Hey, I've got this money, let's do business!" Unfortunately, I don't think it's going to be all that simple.

I really need to ask my guy what his terms would be. When we showed him the property I was looking at, he basically just threw out a number he would be willing to put forward and then some basic terms for interest rates and points. There was never any discussion on how that money should be used or whether or not he was to have a lien position, or any of that. I know, I need to clarify that with him..

I just got off the phone with another Hard Money Lender. During our conversation I asked what he thought about someone else funding a large part of the purchase price and he said something to the effect of, "well, as long as he doesn't want a lien position, we don't really mind." 

What should I do? I know I need to talk to the Private Money guy and see exactly what his terms are, but is this typically the situation? I've heard that you can use Hard Money to fund the majority of a deal and use Private Money to fund the remainder. I know the PML is going to want some security, is there some other way to offer that? When it comes to the HMLs, are there companies that don't mind another investor being involved? How is that usually resolved? How do you determine who get's first and second position? How can I structure this so that everyone is protected and we can get this deal 100% funded, with nothing coming from me! That'd be the ideal situation for me!!

So, I've been looking for a house to flip in my area and I've been purposely looking around the $150k ARV price range. Surprisingly, the biggest problem I've run into is funding. It's not that people don't want to lend, but when you're talking to hard/private money people about buying something under $100k, for the most part, they're uninterested. However, if I look at spending over $150k, suddenly all these doors open.

My reasoning for choosing such a low price point to begin with was for security. If all else failed, I knew that at the end of the day, I could buy the property for myself. I did not expect to run into this problem - the property is too cheap to fund!? So now, I'm looking at more expensive properties and I've noticed that other than quality, there's really no major differences. The square-footage is the same, a lot of the amenities are the same. The biggest differences are the neighborhoods, where they're located and the age of the home. In many cases, the material used for the flooring, cabinets, counter-tops, tiles, paint and all that... it's all the same stuff! You're not paying much more, just because it's a nicer house, so a lot of that value has to do with those other features, mainly the location!

My question to those more experienced - what am I missing? Have you found this to typically be the case? Am I wrong to assume that a simple rehab on a $150k house with 1500sqft isn't going to cost much more, or be much more work, than a $250k house with 1500sqft? 

UPDATE TIME! 

So, I just got back from meeting with the Realtor and the Contractor at the property! The bad news, the property is in worse condition that we were made to believe from the pictures. That's pretty much a given though, we expected that. The good news is that the repairs are right around where I thought they would be, if everything goes well.. which it probably won't.. I'd much rather plan for the worst and hope for the best!

Once we showed the contractor around, pointing out all the flaws and concerns, he estimates that the job will be somewhere around $35-38k to rehab the property. So naturally, I asked him for the absolute worst case scenario and he said if everything goes terribly wrong, he thinks it could go up in the neighborhood of $58-60k. Now, none of these numbers are exact or set in stone yet, and some of them can't be until after we buy the house. The fact is, we won't REALLY know what's wrong with it until we start tearing it apart - so we plan for the worst and hope for the best!

So looking back at that low ARV of $130k I mentioned before, if we account for $60k in rehab costs, $91k keeps us under that 70% LTV. Now, I know that because I plan to live there, I can refinance up to 97%. If this were a rental, I could go as high as 80% and be all-in for $104k and still come out clean... but I don't want to do that.. I want wiggle-room to hopefully cash out some money for my next deal, so looking at this scenario and sticking with the 70% LTV, the best offer price should be somewhere around $31k. This is probably do-able. I'd be comfortable going as high as $40k, but of course I'd rather pay less. If we can't get $40k or under, we walk away, simple as that.

All that to say I still have one MAJOR problem - the money to do the deal! What should I do? Who should I talk to? Have you ever tried to finance a deal but no-one would touch it because it the loan amount was too low? This seems strange to me, especially when you have a guaranteed buyer, but this is my situation.. what should I do? Who should I call? Ghostbusters!?

@Liz Brumer share any contacts you come across, always looking for good teammates!

I'm running into a weird problem right now. Most people complain that they don't have enough money, but in my case, the issue is more like this - the amount of money I need is so low that no one is willing to help me out!

Let me explain a little more... I found a house here in Central Florida that I would like to rehab and refinance. It's not in terrible condition, but it does needs work! Here's the catch, the house in foreclosure and the seller wants CASH ONLY! Okay, so look at Hard Money Lenders, right? Wrong! Most of them won't lend on an owner-occupied property (I don't know why, I'm a guaranteed buyer!) and the ones that will, when they look at the price tag, they say the loan amount it TOO LOW! It's a strange world, this real estate business! Lol

To give you some better ideas on the numbers; the home is currently listed for $60k. Based on the research I've done, we shouldn't have to pay more than $50k and the actual price is probably closer to $43k. I know this because another property sold in this area for $50k and it's about the same size and same condition as the one we're looking at. As for the ARV, I estimate that to be around $150k when it's all fixed up! Huge upside!! How do I know this, well, there was a recent fix and flip in this area - like literally around the corner - and that house was bought in a similar condition in 2015 for $70k. Something obviously went wrong because it didn't list again until 2019, but when it did, it sold for $143k! Assuming they followed the 70% rule, they shouldn't have spent more than $30k on the rehab, so still, pretty good numbers!

Now, I am going to that property in about 3 hours to look at everything in person. I have one contractor meeting us there on short notice to estimate the job for us, and I've got 3 more who are getting pictures and measurements to give their opinions later. After that, I'll have a more solid number for that rehab, but let's break this down - If I get this place for $50k and put $40k into the rehab, I'm all in for $90k on a property that might appraise at $130k. That's a worst case scenario, and we're still under 70% LTV! But no one wants to fund the deal, and I don't have the money laying around to make it happen on my own... so, if it was you, what would you be doing in this situation?

This may not be exactly what you're asking, but I just called my bank to ask about this and they told me the only way they would allow a title transfer to my LLC would be to refinance it into a new loan, under that LLC.

@Tyler Speelman, I'd say stick to whatever terms you have laid out in the lease. Like others have said, so long as you aren't losing money and can get another tenant in that unit, I don't see a problem in working with them. That said, they signed an agreement, if they want out, I'm sure those terms are spelled out. How flexible you are on that is ultimately up to you. If it was me, I might be inclined to work with a good tenant, especially if I can re-rent it quickly. If it's a relatively new tenant or someone who's been a pain to deal with, I'm probably going to stick as closely to the letter of the original agreement as possible.

@Austin Bauer I think you're probably right..

 Yeah, I'm not opposed to paying more for a better job well done, but I just want to make sure he's not screwing me too badly on the price. This is probably my weakest area right now is the cost of things when it comes to rehab and labor for these sorts of jobs. I was just amazed at the price difference between the two. I'm still not certain what I'm going to do yet, but if I'm being honest, I'm leaning more towards the second quote, just because this ISN'T a super fancy area. It's not a bad place either, I just don't know that it warrants a $2,400 paint job. When I bought the house, everything was painted the same white color. I mean EVERYTHING too.. not just the walls and all that, but the outlets and light switches too! Who needs painters tape, right? Lol.

 Yeah, the first guy did seem very busy. His quote mentions right at the top that it includes "labor, paint, and materials". They also mention they plan to "Apply Pristine - provided semi-gloss paint to trim and doors". They mention that throughout the quote, that they will "Apply Pristine - provided paint". A quick Google search looks like that might be a Valspar paint product? I'm not sure

The second quote mentions 1300sqft (double the units floor sqft size) and says they plan to "paint ceilings + walls". They also mention that they will be using Sherwan Williams Interior SuperPaint. Found that pretty easy on Google! As far as a detailed scope of work, it's not as thorough as the other, but they do say, "trim + ceiling bright white" and "walls light grey".

So looking at both of these quotes individually, it does look like they were all inclusive on the price as far as material and labor costs, of course, I will verify that before we get started. I would just hate to pay this cheaper company and have them come do a terrible job that just has to be redone by someone else more expensive later. I have no reason to believe that they would do a bad job, it's just something I think about. Lol. Anyways, hopefully this helps.