Posted by IB (NJ) on July 03, 2003 at 09:19:10:
That’s why I used the * as opposed to saying “some in Sean’s book…”.
The bottom line is that HML’s are in it to make money much like you and I. Start borrowing money and flipping properties before they get to make some profit (or should I say ‘profit’ as defined in a HML’s book) and you won’t be doing business with them much longer.
Hard Money Lenders and flipping/wholesale??? - Posted by gtongox562
Posted by gtongox562 on July 03, 2003 at 05:32:01:
Say I found a house from a motivated seller worth $280,000 that I got under contract to purchase for $200,000. I get a hard money lender to provide the full $200,000 plus all other cost (closing, etc.) to buy the house, but has a 11.125% at 15 years fixed w/ 0 points because they base their loans on equity. I cannot afford to pay any holding costs, so I quickly flip it for $220,000 within a week from closing with the original seller or I do a double closing. I can flip it so quickly because I already lined up a list of investors before I closed with the original seller. This is my exit plan. Since I don’t pay any points to the Hard Money Lender up front, they do not make any profit because you flipped it so quickly before you even made one monthly payment to the Hard Money Lender. Is this a real world situation? Can you get a HML to provide you with money to purchase a house that you have set to flip, leaving the HML with nothing to profit? Do HML lend you the money only if you keep the property for at least a certain amount of months so they get atleast something? Or do most HML do not deal w/ people who want to do a quick flip?
Re: Hard Money Lenders and flipping/wholesale??? - Posted by Tom-FL
Posted by Tom-FL on July 04, 2003 at 16:44:49:
I’m a little lost here. Why do you want to get a loan and close on the house if you are flipping it? Why don’t you just sell the contract for $5000 and be done with it? Am I missing something?
doesn’t sound realistic - Posted by Brian(md)
Posted by Brian(md) on July 03, 2003 at 07:44:16:
How much research have you done on hard money lenders? You basicly said up front that you want someone to lend you money without them expecting to make any return on their investment. I am almost 100% sure that this is an unrealistic situaion.
The LTV on this house is aprox 72%. There are plenty of hard money lenders out there that will lend up to 75%…some even more.
Those are hard to find though. Most max out at 70% LTV. They check credit also and…well…they all seem to charge points.
Even with special program that companies like rehabfunding.com have, like 0 upfront points, the points are figured in there somewhere.
Sounds like you are approaching this wrong. You are trying to wholesale the property. You already have buyers lined up. Check to make sure that THEY have financing.
When you sign the contract, insure that it is assignable, or sign the contract in the name of a corp or LLC, and then at closing sell the LLC and your interest in it to your rehab buyer.
Then you don’t have to worry about a hardmoney loan, your buyers do.
Just double tap them to make sure that THEIR financing is lined up.
Re: Hard Money Lenders and flipping/wholesale??? - Posted by Sean
Posted by Sean on July 03, 2003 at 07:38:10:
Ok, here’s the general rule on HML’s. At least the ones I work with.
I work with 2 HML brokers, their rules are points up front and high interest rates. The Broker actually gets the points and the money partner (private money) makes the interest.
Now with that said, if you find a HML who does zero points, and buy and sell quickly you can theoretically do what you desire, and only pay them the interest for the time you are holding the property. PROVIDED there is no prepayment penalty in the HML loan.
I have used HML for very short periods in the past, and yes they will allow you to do it… but I am not sure personally why you are wanting to close on a quick flip.
Unless your seller is an institution (bank or corporation) all you should need to do is get the property under contract and then sell the contract to your end user for an assignment fee, or do a simultaneous close and you won’t need a HML at all.
Institutions are one of the only entities that can be sticklers about selling the property ONLY to the person the contract to sell is to. The only other issue could be the buyer you are selling to is getting a loan and may want your name in the chain of title, but even that can be handled by a simultaneous closing.
Best of luck
Re: Hard Money Lenders and flipping/wholesale??? - Posted by michaela-ATL
Posted by michaela-ATL on July 03, 2003 at 07:33:21:
I have not come across any HML, that don’t charge points. They want to make profit. The standard in my market is 13-15%interest and 5 points. Some of them charge 1-3 months prepayment penalty in addition to that. If you can find someone, that won’t charge you points, then hold on to him.
michaela
Re: Hard Money Lenders and flipping/wholesale??? - Posted by IB (NJ)
Posted by IB (NJ) on July 03, 2003 at 07:30:58:
Most HML’s will either get paid their points and fees on the front end (when you buy) or on the back end (when you sell). Thus the HML will make some sort of a profit. One HML I worked with discourages their investors from flipping properties and instead encourages them to rehab the property AND use their rehab funds. They’d rather make a nice profit on the interest only payments.
However, I recently spoke with someone from Brookview Financial who advertises that they provide funding for quick flips. Give them a call at 877-734-2211. They do require that you have some experience and invest some money into the deal.
Re: Hard Money Lenders and flipping/wholesale??? - Posted by Sean
Posted by Sean on July 03, 2003 at 07:41:17:
Some is such a relative term, 15% of purchase prices is more than SOME in my book, which makes their loans not attractive to me. Sure they go 70% of LTV, my current guy goes 60-65%, and their points are a little lower, but not much, so with their 15% down requirment that 70% LTV actually ends up being less cash in my pocket than I can get at 60-65% through my local guys.
But it is a resource, and that’s what is important.