How To Get Financing

How to Structure Your Deals

There are various types of hard money loans available such as: fix and flip loans, refinance loans, construction loan, private money loans, rental property loans, bridge loans etc... As an investor fixing and flipping properties, it s going to be important to get your line of credit with a Hard Money Lender ("HML") established. 

It is good practice to begin to establish multiple relationships with Hard Money Lenders. We usually recommend 3. Hard Money Lenders will usually be the primary source of financing for fix and flip properties if you do not have the cash to purchase them outright.

Most Fix and Flip Investors usually start off using Hard Money Loans to purchase their properties. Hard Money Lenders will lend you the money to purchase homes within 10-30 days. These loans are extremely attractive because of the short time frame that it takes to fund. Different lenders will have their own underwriting guidelines and qualifying criteria, but for the most part, these loans are asset based loans. Meaning, they are loaning on the asset itself (the property and the deal), and not your personal credit. However, lenders will pull the borrowers credit to determine their credit worthiness and will sometimes check your assets. It's important to have a good line of communication with your preferred lenders so that you can begin to establish a strong business relationship. Get your financing secured and in place prior to submitting offers.

Here is an example of a typical Hard Money Loan structure.

ARV (After Repair Value): $850,000

Purchase price: $500,000

Loan To Value of the Purchase Price: 85%

Rehab Loan Amount: $100,000

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First Loan Amount = $425,000 @ 9% interest only

Monthly Payment = $3,187 (interest only)

Rehab Loan: $100,000 @ 10% interest only

Monthly Payment: $833 (interest only)

Total Monthly Combined Payment: $4,020

This example shows what your monthly payments are going to be. Based on this information provided, a typical experienced investor will usually carry these monthly payments for about 5-6 months. It's also important to understand current Real Estate Market conditions so that you can make intelligent and informed investing decisions. You must able to determine how long you should expect to carry this loan for, because this will directly effect your net profit.

HAVE SOME PRACTICE CLICK THE LINK TO CALCULATE YOUR LOANS

*** Hard Money Loan Calculator ***

Best Practice - When you're first starting your business, it is recommended that you have a mentor or a coach to analyze your deals. Running the numbers and underwriting good deals is what will make you money, or cost you money. 

It is recommended that you start to make offers on properties as soon as you have established a line of credit with a lender. Practice writing offers, and practice your underwriting skills consistinenly. The more offers you make, the better you're naturally going to become at making offers, running comps, analyzing deals and get you familiar with this entire process.

Once you have established your relationship with your preferred lender, you will need to request a "Proof of Funds" ("POF") letter outlining how much your credit line is good for. The date of the letter, and the name of your buying entity must be on this form. It's important to have the POF with your lenders letter head and include contact information for verification purposes.

https://www.themaxlending.com/marco-chaidez

This is our preferred lender. Through our coaching program, our students can structure their loans to avoid having monthly payments. Learn more by scheduling a call with one of our coaches to get your credit line established.

Message us on instagram @mchaidez2014 or send and email to [email protected]