All Forum Posts by: Zach Hubert-Allen

@Dani Beit-Or Awesome stuff. Pretty ambitious of you to be doing a rehab, as well as ground up construction on the neighboring lot. How are you currently financing your projects?

Bryan,

A few things to note:

1. I see that you have a 50K rehab for cosmetic work. Did a contractor give you that bid or is that just an estimate? 

2. Most HML's require that they are the first and only lien. If the deal goes south and the property is foreclosed on, HML's don't want to deal with other lenders liens on the properties.

3. Hard money lenders vary in how they structure the deal. Some do 70% ARV, Some do 75% AIV(As-Is-Value) + 100% of rehab costs rolled into the loan. It is all dependent on what works best for your situation. Bottom line, unless you have a private lender who will cover the gap funds, you will need about $300,000 for your down payment, About $15,000 for origination(points) and closing costs.

It's not an outlandish deal, as long as the numbers are accurate. I work for a Bay Area Hard Money Lender and would be happy to draw up some numbers for you. Feel free to reach out.

@Stephen Dickey How did you finance the deal?

@Shawn Munoz Rate is determined by experience and LTV. If this is your first ever flip and they are giving you an 85% LTV, than that would certainly be competitive.

Also, I wouldn't harp on the interest rate so much if you are holding the property for only 2 months. The difference between 12% IR and 9% interest rate looks something like this:

-Assume $100,000 total loan amount-

@ 12% Interest: (100,000)(.12)/12= $1000/Month

@ 9% Interest: (100,000)(.09)/12= $750/Month

If you are holding the property for two months the difference between the interest rates is $500. 

For these short term flips, you should focus on three things:

1. Points for Origination of the Loan

2. What is the max leverage(least amount you can put down)

3. Will they fully fund your rehab?

Feel free to reach out to me with any questions, as I work for a Hard Money Lender and am happy to share my knowledge with you!

Douglas,

To speak to your point about looking for HML's outside of big cities:

-Hard Money Lenders are typically asset based lenders, meaning the asset is their collateral. 

-In order to valuate a property as collateral, there must be a number of comparable properties. 

-Obviously in smaller towns, sometimes there are not enough comps to comfortably lend.

-Also, many HML's have a minimum loan requirement.(Loan Amount + Rehab Funds) My company's is 75K, meaning we would be unable to lend on a property that is valued at 30K. These thresholds are harder to reach in more rural/suburban areas.

-I would seek out local lenders or perhaps a HML based in Indiana. Hope this helps!

My company has a minimum credit score requirement of 550. As long as you reach that threshold, we'll lend to you. The thing that modifies the interest rate is experience, not FICO. We value number of flips done more than credit score. All HML's are different though. I'm 22 and just graduated from school as well, similar situation and I'm at around 650 so you should be good to work with HML's moving forward.

100% financing is a luxury you get with private money. No HML does 100% financing to my knowledge. If they do, it is usually a red flag. I've heard DoHardMoney has a lot of up front fees and poor pull through rate, search the forums for specifics.

@Michael Batista  Thanks for the reply! To be completely up front, my company doesn't do anything in the commercial space. We offer residential acquisition + rehab funds, refinances(seasoned/unseasoned), and have just started doing consumer mortgage (30 Year Fixed) in 2017 which we are obviously really excited for! 

@Kuba F. Couldn't agree more. Trust and reputation are quite literally everything in this business. I think a lot of that has to do with setting the right expectations and following through on them. Thanks for sharing! If you are ever in SF I'd love to grab a drink and talk REI.

@John Mathewson Thanks for the quick reply! I've definitely noticed that trend. When I talk with borrowers, a lot of the times they are apprehensive or defensive. I think people have just been a bit soured by HML's because of failed expectations and blatant dishonesty.

One thing I will say. HML's DO want the loan to close as badly as the borrowers. If the loan isn't established:

A) It is a horrible customer experience and causes the borrower to scramble for funding, completely eliminating the prospect of repeat business.

B) If the loan doesn't close nothing is made from it. (Interest and Origination) 

Hey BiggerPockets! Just wanted to feel the room a little bit. What hard money lenders do you enjoy working with and why? I am in the HML space and want to know what borrowers value most when it comes to lenders. All responses appreciated!