I was wondering if any Aussies have got hard money finance and successfully purchased a home with this?
Has it all been going well so far?
I have heard that hard money lenders are predators and actually want your home when you cant keep up with the payments?
trent74 wrote:I was wondering if any Aussies have got hard money finance and successfully purchased a home with this? Has it all been going well so far? I have heard that hard money lenders are predators and actually want your home when you cant keep up with the payments?Being a hard money lender in my day I would not say we are predators, and I for one never make a loan to Own. I always want to get paid back If I wanted to own the home I just do what I am doing now and go buy them.
hard money is meant for a short term. thats why the points and rates are so high, they are not intended for long term.
One thing with Hard Money is a good hard money lender is going to Know the TRUE value of the asset not the puffed up value that these are usually sold at accross the globe.
if you have true equity you should be able to get a hard money loan if it makes sense to the lender and if the rates and fee's work in your cash flow model usually they won't. And like I said they are usually only for 1 to 2 year terms with balloon payments.
Just like Banks us hard money guys got burned in 08 when our clients could not longer get refi's so exit strategy is important.
There is a lender in SoCal that I run some deals through he will give 8 year money at 10% interest with 4 points. thats about as long term and cheap I have seen hard money. but he only does SoCal and to experinced investors if your buying your first property he will not loan to you.
Hi Trent,
I have a couple properties that I have financed through private lenders. The rate was 8.25% on a 3 year arm with a 30 year amortization. My goal is to pay them off within the 3 years using the rents received, if that doesn't work they will allow me up to 5 years if the loan remains in good standing. I had to put 50% down payment but it has allowed me to purchase more properties. The properties are located in Kansas City. I believe there are only certain areas that have this kind of financing available in the US.
MJ
mjcantrell wrote:Hi Trent,I have a couple properties that I have financed through private lenders. The rate was 8.25% on a 3 year arm with a 30 year amortization. My goal is to pay them off within the 3 years using the rents received, if that doesn't work they will allow me up to 5 years if the loan remains in good standing. I had to put 50% down payment but it has allowed me to purchase more properties. The properties are located in Kansas City. I believe there are only certain areas that have this kind of financing available in the US.
MJ
More than likly your loan came from the seller of the property and your 50% down paid the entire cost of the home and the note they took back is their profit…. This is a very strong strategy for US sellers. Get all their cash back and have a nice note that you will probably pay back.
Hi Jay,
The lender was a third party and they currently lend in 4 U.S, cities. All is well I am still receiving over a 14% ROI after fees and carrying cost.
MJ
Good to know I am working on a fund specifically to lend to Aussies that want 50% financing.
We are toying with the following program and am wondering if anyone would care to give me some feedback wether this would work
8% interest some points plus 3rd party settlement fee's lenders title insurance etc. Fully amortized 10 years.
I for one do not like Balloon payments unless you have the funds in the bank and can easily pay them. So I am thinking the 10 year fully amortized would be a good product. Although when I run the numbers on the following scenerio
purchase price 100k
down 50k
loan 50k @ 8% fully amortized payment is 606.00Then on the income side say rent is 1200.
120 management fee
200 tax's insurance
100 letting fee if applicable and or vacancy factor.
100 maintenance
600 payment1120.00 per month would be actual expenses so net cash flow is 80 bucks a month or to round up 1200 per year… Cash on cash 1200 annual return on 50k down payment is well not a lot. but someone else pays your house off and you own it free and clear in 10 years.
Your rate of return of 14% you quote is based on an interest only payment is that correct. Or are you saying that the cash flow including the payment of note and all other cost will allow you to pay the note in full in 3 years without you coming up with additional funds??? Is this how you see it.
Jay
My partner and I are both in the office if you have a free moment . Our office number is 803-325-1925. Now the houses in Charlotte we sell are priced about $ 85k and under. Very similar to Atlanta properties .The next level of homes the we like to offer are priced from $110k up to $150k .Much nicer homes and in well established areas. Rental income roughly 1 % of purchase price. Meaning $150k rental $1500
The financing you are speaking about is much more realist for foreign investors , especially with the nicer homes more in established neighborhoods . Now we do buy every home we resell, we do all the rehab , and provide a inspection report( separate company). Fully turn key with us, along with managing those deal in house.
This is Charlotte only.., We have a team set up in Atlanta but we do not manage homes there. Florida ( Port Charlotte , and Sarasota ) currently working on setting up shop there. We are starting our own management company there.
I have your cell but don't want to bother you unless you are free.
Thanks
Alex
Alex SC wrote:JayMy partner and I are both in the office if you have a free moment . Our office number is 803-325-1925. Now the houses in Charlotte we sell are priced about $ 85k and under. Very similar to Atlanta properties .The next level of homes the we like to offer are priced from $110k up to $150k .Much nicer homes and in well established areas. Rental income roughly 1 % of purchase price. Meaning $150k rental $1500
The financing you are speaking about is much more realist for foreign investors , especially with the nicer homes more in established neighborhoods . Now we do buy every home we resell, we do all the rehab , and provide a inspection report( separate company). Fully turn key with us, along with managing those deal in house.
This is Charlotte only.., We have a team set up in Atlanta but we do not manage homes there. Florida ( Port Charlotte , and Sarasota ) currently working on setting up shop there. We are starting our own management company there.
I have your cell but don't want to bother you unless you are free.
Thanks
Alex
I am in Vegas this week and week end, contact me next wed. I will be in the Southeast… 503 789 2451
Here are details of the loans we have completed:
Atlanta, Phoenix, Kansas City, St Louis
50% Loan
9.5% Interest Rate
5 year termOr
I have been notified of another product and this product is from an institutional lending fund
Phoenix property only
50% loan
5.99% interest rate
7 year termThese loans are based on purchase price and all the fees can be blanketed into the loan so there is less down payment required.
Do your own numbers, but these figures suggest you could pay off your debt within around 7 years if your net return is a good distance spread from the interest rate
quick numbers on the 9.5% product
50k purchase price say KC rent 700
payment needed to pay in full in 5 years would be 860.00 a month.
so with T&I 150 a month
maintenance 100 a month min.
Letting fee 50 a month over 5 years.
management 70 a month
negative on payment 160
So over 5 years this will cost you 520.00 a month out of pocket or negatively geared. and you own the house fee and clear in 5 years.
Is this something the OZ investor would consider to own a property free and clear in 5 years.
25k down plus closing cost and all your set up fees. LLC etc. say 5 to 7k
so 32k out of pocket to buy then the 520 negative cash flow
Or do an interest only loan with a balloon that will give you a payment say 200 a month. keep your 25k in the Aussie bank making 7%
and pay the balloon payment when it comes up,Does not appear by the numbers that you can buy a US rental with the 9.5% program and the rent alone will pay the loan off unless you get longer term financing at lower costs.
would be interested to get Aussies feedback on how they view these options
Jay sounds good .We will be in Atlanta on Thurs then flying to LA I am speaking at small seminar ( fri night in Anaheim ) Sat in LA…
Talk to you on weds
thanks
Alex
Jay,
The key to this is making sure you get your net return a lot higher than your interest rate. So this loan structure works in cities like Kansas city where returns are a little higher, but wouldn’t work as well in Phoenix because as you have pointed out, you would have negative cash-flow. It’s a numbers game and here’s my example below for a KC home with this product:
50k home
18% Net Return ($9,000 per year income after all expenses) = NOI
50% loan
9.5% interest rate, 20 years amortizationDownpayment = $25,000 + $1,500 closing costs = $26,500
NOI= $9,000
Interest Principle Payments = $2,517 Interest $1,325 Principle = $2,842Surplus to use to pay off loan = $6148
$26,500 / $6418 = 4.13 years to pay off loan, and this does not include the principle payments that are also paying off the loan
jay,
In your example, I would not be happy with proceeding with that loan structure. As the net return on that deal is too low and therefore negative cash-flow is affecting our ability to pay the loan off.
Different loans will suit different markets.
Look for lower interest rate loans for Phoenix and other lower cash-flow yielding markets and markets like KC and Atlanta, the 9.5% interest rate loans can still pay off your debt very quickly if you have the right rate of return
property scout
Not sure I am following your numbers
How do you NET 9,000 a year on a 50k rental in KC or anywhere for that matter.
Thats 750.00 a month net cash flow
How do you account for property management, on going maintenance, vacancy factor, property tax’s, property insurance and letting fee’s.
I submit that these expense’s are
75 month PM
100 maintenance
150 tax’s insurance
50 letting fees
50 vacancy factor.For a total of expenses of $425.00 a month. So for an investor to net 18% return or 9,000.00 per year in your example the gross rental income would have to be $1175.00 a month on a 50k rental property in KC. Which I am fairly certain does not exist. Nor am I aware of any property in the US that you can purchase for 50k will rent for 1175.00 per month. Even if you take out letting fees and NO vacancy factor which a lot of people do not take into consideration your still talking 1075 a month……
Would be interest in your response and you detailing how you come up with 9000.00 net income unless like I said your KC rentals are bringing in 1100 hundred plus per month.
Best,
JLH
insurance $450
Property tax $400 (these are on average my numbers I have paid for my houses)
Management $900
Maintenance factored in of $300= $2,050
Which means the properties around the 50k mark will rent for around $920-950/month
Very achievable in my experience
Havnt factored in vacancy and usually factor in around 10%
Paying off these loans in 5-7 years is achievable, as long as you have the right management in place.
Keep in mind you have quoted high maintenance costs and high tax quotes. Taxes are fairly low in KC and my property are all basically brand new inside so the maintenance hasn’t been a huge issue as yet
Hi All,
A client came to me about obtaining finance in the US to purchase a property in Texas (The merits of which are a little are still doubtful to me).
They are setting up a LLC to own the property, in Texas.
As a newbie in this space, can you suggest any 'Bank or Broker' in either Australia or US that could look assist me at putting such a deal together?
Thank you
In the current climate "Goodluck".
There is no Australian lender that will take a US property as security although obviously if they have equity in their Australian properties that is a different story
We used to have dealing with 6-7 US Banks and successfully processed 101 applications but that was in the good old days.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Alex: You are setting up shop in SW Florida and haven't reached out to me? I'm not in Sarasota or Port Charlotte, but I am going to have to sway you away from those areas over a bottle of Crown. I'm just confused as to why you would buy there at the same price you can buy in, say, Cape Coral. The upside and current appeal is not close between the two in my opinion.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone Me
You must be logged in to reply to this topic. If you don't have an account, you can register here.
