Posted by Bob Beckman on August 01, 2005 at 07:39:57:
Thanks Robert, we look forward to working with you again!
Bob Beckman
Rehab Funding
deferred payments on hard money loans? - Posted by Robin in Oregon
Posted by Robin in Oregon on July 29, 2005 at 24:21:22:
I’ve seen the infomercials and read some articles and books, but am still not sure what is the best way to go about financing investment property. I own my home but have no equity (took out an equity loan to pay off medical bills and credit cards). My credit score is in the low 700’s and I have a steady job and good income, but little to no savings. I have been visiting this site on and off for 3 years, was renting when I started and decided to buy my own home first. Now I am seriously wanting to get started. Have looked at a property just a couple blocks away from where I live that has a good rental history, needs some work. It’s FSBO and the owners seem anxious to sell. I would really like to get a deal done in the next few months. Even if I don’t make a lot on the first deal - I really need to do something to get the ball rolling. I have a teenage son who is very interested in real estate, and I think it would be great to get him involved, as well. My biggest obstacle is financing. I was thinking a hard money loan with interest only payments to get in and get a house fixed up, get sweat equity, then refinance conventionally and rent it out. My question is, are hard money lenders generally willing to work with a novice investor? Is it possible to get a loan with payments deferred for 2-3 months, to allow time to get the repairs done and get the house rented? Should I even be thinking about doing this without a cushion of a couple thousand dollars? Any advice is appreciated.
Re: deferred payments on hard money loans? - Posted by John B. Corey Jr.
Posted by John B. Corey Jr. on July 29, 2005 at 15:41:00:
Robin,
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I am from Oregon.
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I and some other people I know provide hard money (as does Bob Bechman at Rehab Funding).
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Hard money does not solve all problems. The more successful investors that I fund find deals that are significantly below true market value. This way they can get in, fix the place up, rent or sell and still show a profit even with all the holding costs including the hard money loan costs.
Hard money is not cheap. Lines of credit and other things can be a better choice.
As to your FSBO deal.
You did not mention where in OR you are. What does the rental market looks like compared to the home values? If you are good with a financial calculator you can figure out what you need in cash flow to be right side up. As was discussed at the CREOnline Lenders Workshop you want to assume that only 65% to 70% of the projected annual rental income will be available for debt service. The rest will be spent on taxes, insurance, maintenance, property management or is income that does not happen given vacancy.
You clearly need to get started. Hard money is one tool in your tool box. You need to know when to take it out and when to use a different tool.
One other comment. The term ‘hard money’ was coined some time ago. More or less before there was credit scoring. Hence true hard money mean no credit check is done and any credit score will do. More recently some lenders are using the term hard money but really offering non-conforming loan terms. The above is from Ed Garcia as reviewed in the Lenders Workshop. Non-conforming loans are yet another tool and some of the time the right one to be using.
John Corey
Chelsea Private Equity LLC
Re: deferred payments on hard money loans? - Posted by Rob
Posted by Rob on July 29, 2005 at 01:27:08:
Robin,
As long as you have a 680 or above, you will have no problem. I used rehabfunding for my first Hard Money deal. They advertise on this site and can be found at www.rehabfunding.com. The interest rate is high (18% annual), but if your score is at least 690 they will defer your payments for 9 months. I just refinanced out of their loan and put over 30K into my pocket at closing. It took me about 3.5 months to complete my rehab. The only obstacle you will have is sufficient funds in your bank account. They want to see that you have some money to pay contractors the intitial deposit. You can get around this if you have a credit card with about a $5K limit that you can use in place of your hard earned cash in the bank. If you don’t already have a card with a $5k limit, you will not have a problem getting one with your score. It is important to note that Hard Money lenders will only lend 65 to 75% of the After Rehab Value (ARV) so your deal better be good. In all other cases, you will be able to get a stated income loan with zero down and a pretty decent interest rate with maybe a 1% pre-payment penalty.
I suggest going to your local investors association first before you talk to any mortgage broker. Find out from other BIG investors which brokers they use.
With your score you will not have a problem getting a loan. Your biggest challenge will be finding the right deal. Don’t put a time limit on it. I started out with just one deal and now I have to decide what deal I’m willing to take on or pass on to someone else. The deals are there, but you have to be patient.
Good Luck
Rob
Re: deferred payments on hard money loans? - Posted by Bob Beckman
Posted by Bob Beckman on July 29, 2005 at 11:09:21:
Rob,
I’m pleased that you had success using oour programs, but for the record I wanted to correct a few of your statements since many reading your post may be unfamiliar with Rehab Funding.
Borrowers may have as low as a 620 credit score to work with us, not 680 or 690.
If you have a 620, you can qualifiy for our Monthly Pay Plan (15% per annum).
If you have a 630 minimum score, you can qualify for our Half Pay Plan. And if you have a minimum score of 670, you can apply for our Six Month-No Pay Plan.
Thanks for letting me clarify this.
Bob Beckman
Rehab Funding
Re: deferred payments on hard money loans? - Posted by Rob
Posted by Rob on July 31, 2005 at 02:11:32:
Sorry Bob!!!
I truly am sorry for the mix up! Your program has been a total blessing to me and my family and has allowed us to take a giant step in real estate investing. I promote your services every chance I get. Your service is the perfect fit for my investing needs. Just to let you know in advance, I have a rehab deal I’m working on right now that I will be calling you about in a few days.
Thanks again
Rob Wright