Posted by Ben Carmona on July 22, 2007 at 21:03:59:
Tony,
Thanks for your thoughts. When I say “banks”, I mean local community banks where the properties are located…not large national banks which offer wholesale options. Obviously their Fannie Mae loans will limit you and there really are no good wholesale rehab loans for investment properties. (with the exception of 1 that operates very similar to hard money).
Local banks should be able to close your projects within weeks. Here in St. Louis there are 2 banks that work terrificly with rehabbers. It took me several weeks of making phone calls but I knew exactly what was needed and found it.
20-30% is not a huge discountwhen when working with rehab properties that need to be funded by hard money lenders. By the way, there are plenty of lenders that allow for unlimited properties.
It doesn’t appear you’re real familiar with hard money rehab loans.
#1…most operate using draws and inspectors similar to banks.
#2…rehab loans are not purely equity driven…“as-is” loan with no rehab funds…yes, but not rehabs. You already made recognition of this and it’s that way with jus about all of them.
You should know as a mortgage broker that your best chance of finding a lender will come from a broker, especially one that specializes in investment loans just like these.
My name is Tony Taylor and I’m owner of Old House Investors, LLC. I’m in search of private money and hard money lenders in the Washington DC area. We are only looking to work with lenders that can act quickly upon reviewing our complete proposal for a property. Our proposals are very detailed and include the draw schedule, virtual tour, CMA and several additional pieces of supporting documentation.
All deals are titled in the name of the LLC. And most loan amounts are between $400k-$700k which includes the repairs. We will also entertain working with private investors that are willing to just finance just the repair budget which tends to be between $50k-$150k and we will arrange the aquistion financing. Please let me know if you can assist us.
The biggest reason we prefer to use private or hard money is due to timing. The name of the game is being able to act quickly to take advantage of opportunities. No homeowner or bank wants to discount a property 20-30% below the asking price unless you are settling in days. If you ask for a 30 day contract, they are better off leaving the property on the market. In addition, I cannot use banks due to the number of properties I already have financed. I’m a mortgage broker and if you don’t know, most lenders will not allow you to have more than 6 properties currently showing and only a few will allow up to 9.
And I’m not sure if you have used banks, but their draw system tends to be a lot more tedious. Inspectors take longer and lack the knowledge of how to keep a project running smoothly. I have worked with IndyMac and National City in the past and I have stories.
As far as documenting income or assets, none of that should matter as we are talking about equity driven loans. I’m actually very surprised how many hard money lenders that are starting to require income documentation and are max out LTV at 65%.
Bottom line is that I’m not looking to work with a broker as I’m a mortgage broker and I currently work direct with one local HM, but want to have other options.
tony-
here are some I have used with success. redevelopmentlending.com, Omni Nat’l bank.
Bison financial.com,Northern funding LLC,718-544-7790
Gala resources inc