Top Hard Money Lender for You

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Transcript

I’m Casey Gregerson your
host and I’m very excited you’re tuning
in to today’s episode as always if you
have questions for me or any of our
guests please reach out to me at Casey
Gregerson properties.com now let’s get
get started with today’s podcast okay
guys welcome in today hey I got a
special guest Darren mcgurn today so
Darren is with Lima Capital so we’re
going to be kind of diving into type of
lending they do so guys I’ve done hard
money lending I’ve done private money
lending and I’ve done a lot of small
Bank lending and there’s a lot they
don’t a teach you this in school and
then B even as an investor like it’s
just hard to understand it and I haven’t
really seen a whole lot of platforms out
there where they really go into how like
what type of Finance you should look for
especially when it comes to hard money
because again when I first started
getting in hard money I remember I think
I just first read like Brandon Turner’s
book on buy or what was it uh buying
real estate with no money down and I was
trying to figure and he’s talking about
hard money lenders so immediately I
Googled hard money lenders and there
were none in Wyoming I’m like shoot how
do I find them right and they were they
were all over the place in like Dallas
Fort Worth but I couldn’t find them
anywhere in Wyoming so anyway I’m
excited to talk with Darren today he can
kind of tell you some of their terms and
how it works but Darren let’s actually
start there like kind of how just give
us in a recap kind of how hard money
works in your world in a couple minutes
yeah so Lima one capital is uh you know
we were founded by two Marine Corvettes
that came back from serving in Iraq and
you know they they found a niche in a
Marketplace that you know they were
doing fix and flips but also saw the
financing side needed some cleanup and
this is you know 14 years ago and and
they saw a need for a hard money lender
that was a little bit more consistent
more reliable and so they went out and
started uh you know seeking Financial
backing to be able to support the
industry from you know taking their
their Marine background and you know
we’re going to do what we say and say
what we do and provide lending for those
that are out there doing flips and
Bridge and and really what they’ve gone
into was the hard money lending is you
know kind of Falls in this in private
lending now would we typically be what
we’re called is uh and you kind of fall
in between you know a local guy that’s
got a bunch of money and then a bank you
know the banks are they’re less
expensive but they’re slow and they’re
going to ask for tax returns they’re
going to want a lot of documentation the
hard money lenders are expensive but
they’re quick and so people can react
quickly in the market if there’s a a
purchase or a transaction that needs to
happen you know at a at a Quick Clip now
private money is kind of in this in the
middle space where we’re not as cheap as
the banks we’re not as expensive as uh
you know your local lenders but we’re
there to provide high volume service one
we’re backed by you know most people are
backed by financial institutions that
are either publicly traded or are tied
to Wall Street somehow so you know
you’ve got a a lot more Runway than
somebody who’s local and then a lot more
ability to lend than uh you know a local
bank that’s going to constrict based on
you know your income or your W2s or
something along those lines so The
shortterm Fix and Flip loans are U
typical terms are you know 12 13 months
and and those are going to provide you
with a lower uh down payment than you
know a typical banking institution uh
and then we’re also going to provide the
construction budget if there’s if that
property’s disted and needs work so you
know we kind of find a niche to where we
can provide a service to clients like
yourself Casey and uh that are out there
actively buying uh distressed Properties
or even properties that just may fall
under Market uh and you’re going you got
to go out there and take advantage of
those quickly love it yeah so we’ll kind
of get into the two different kind of
options or several different options but
to kind of recap and maybe you can’t get
financing from a bank or maybe you just
doesn’t you don’t want to wait and jump
to the hoops at the small bank or or the
mortgage company wants you to do so it’s
kind of in between that or and again as
Darren said there’s also hard money and
hard money is get again more expensive
can happen faster but again I don’t
advise people to use hard money unless
they have to right it’s more expensive
more Hoops to jump or not more Hoops but
like draw schedules and it just can be
more difficult when using hard money
especially if you got a big Fix and Flip
so this is kind of the happy medium
where you can kind of find the balance
yeah and I would say you know the hard
money lenders are they’re prevalent in
most areas uh they’re good for what
they’re they’re needed for and that’s
being quick the one thing I think people
don’t understand a lot of times is that
I think You’ really need to know what
you’re doing when you get into a hard
money loan because you know you’re not
being handheld in those institutions
because they they know you got to react
quickly and then usually if you don’t
adhere to their you know set guidelines
the penalties are severe so that’s you
know whether that’s a financial penalty
or just you’ve got to drop and get out
of it so that could be difficult for
people that are you maybe a little Green
in the space or novice however you want
to say it they don’t quite know exactly
what they’re getting into where on the
private many side of things I think we
do a really good job especially for
those we cater to those that are high
volume like you guys but we also do a
really good job with those that have you
know maybe watched an HGTV and they’ve
been diving into YouTube videos and they
really want to get into you know doing
their first flip we are very cautious
with them and walk them through that
process to make sure that they’re not
making a big mistake and getting
themselves into something they can’t
handle so Darren such a good point and I
speak from experience I remember when he
first got into hard money it seems like
hey yeah we can you’re watching the
shows you’re reading the books you’re
like hey I could do this especially
somebody who’s like ambitious wants to
go do it but you don’t realize kind of
walk you through all those if then
hypothetical scenarios or or dominoes
That Could Fall In where you’d be so
that that’s really cool that you guys
walk through your clients or people that
you’re working with to set them up for
Success right yeah I mean at the end of
the day we we don’t want to take
anything back back I mean we want to
have a successful project see you exit
with you know making money or if you’re
going to hold it for a renter uh you
know we obviously love that we love that
success we love that continued uh
customer coming back to us whether
that’s they’re going to do their next
Flip or they’re going to go and
refinance into a rental loan and you
know put somebody in there for a
long-term rental yeah I’m glad you
brought that up because people and that
that’s probably the last thing I’ll
cover here is with hard money lenders
there are a lot of hard money lenders
that are built upon taking properties
back and when you default or you don’t
perform they’re happy to take your asset
back and sometimes that’s how they make
even more money right but that’s a good
point of more of a private money lender
or something like the Lima 1 that’s not
their intent their intent is to keep
deals coming and you doing more deals
right yeah I mean and that’s you know
how we’re built is you know everything
has to close in an LLC we cannot close
in somebody’s individual name and that’s
because we’re built to do business
purpose loans or commercial based loans
that are one not going to report to your
personal credit so the more you do with
us the better your uh you know your
paper is with us and we’re not affecting
your ability to run your day-to-day life
I mean it’s we have investors that have
hundreds of properties that they’ve done
transactions with Lima one and then we
have some that have done one or two and
and they’re you know more of a uh you
know just a oneoff type of client okay
so now Darren let’s say that I’ve
actually just did my Fix and Flip and
it’s a birth strategy I want to keep it
as a long-term Buy and Hold or maybe
just say I find a Buy and Hold from the
start that doesn’t need a lot of work
but I don’t want to go to a small bank
again could be due to credit could be
due to the fact that interest rates are
high or I want something more flexible
like what is a it’s called your guys’
dscr product but I’m tell us more about
that yeah so it’s a Debt Service loan so
what that means is that you know your
debt is the mortgage payment and then
the the rent is going to cover the debt
so what we’re looking for is to cover
that debt by 1.2% or greater so you know
if you got a $1,000 rental or mortgage
payment we want to see the rent that
you’re charging your client at $1,200 or
greater and and really what that is is
it’s just showing you that there’s cash
flow in the property and that the rent
renter is going to cover your mortgage
note on a monthly basis so those loans
will go from anywhere from 80% on a
purchase uh to 75% cash out and those
are typical they mirror a conventional
loan the most right so we offer 30-year
fix 101 and 51 arms and then we offer a
51 interest only loan that’s on a 25
year would convert to a 25 year am after
the fifth year expires so those loans
are are very conventional they mirror
exactly what you’ve seen in your
personal House of buying a 30-year fixed
property before so but yeah those are
loans that are highly uh used recently
with the popularity of the Burr I think
you know you you mentioned uh Brandon
Turner before I think he’s probably the
you know the Kingpin behind that too
with just really making that strategy
popular you know to buy renovate and
repeat and refinance and repeat and you
know you’ve got a ton of investors out
there I know you know the two of us are
in Collective genius there’s a good
amount of people in there that uh kind
of have their hats in all sorts of
buckets but that’s definitely one of
them that’s one that people look to uh
you really hold some properties and not
only gain on the you know your monthly
income off the the rental income but
really that gain over time right you
mean as long that those properties are
going to appreciate in uh in most
markets we’ve seen the the housing
markets uh increase rapidly recently but
you know it’s a win-win over time most
most housing markets will increase over
time and uh you know those are those are
valuable assets for people to own yeah
so where these DS loans really help
people is when you can’t so maybe you’ve
already bought several different rental
properties and now the bank is starting
to slow you back or maybe you’ve maxed
out your mortgages or whatever reason
you can’t get qualified through a bank
you can actually these loans the beauty
of them is they’re based on the asset
they’re based on the rent that it brings
in so or you might just have again
there’s people out there that still want
to invest and have bad credit they’ve
got a what did whatever in their past
right but they still want to invest so
is that right Darren basically they
could use this dscr product and is the
biggest caveat they just have to have a
signed lease to be able to do it and it
has to appraise is that the big drivers
yeah and you actually don’t necessarily
have to have a signed lease we can go
off of Market rent so I mean basically
if you’ve got a vacant property so a lot
of times you’re buying a property and
it’s not leased out right so you’re
you’re going to convert it into um or
you did a Fix and Flip and you just
finished it you got your co uh it’s not
leased out what we can do in those
instances is we we ask the appraiser to
give us a market analysis on the rent
and then we haircut that so you know
let’s just say they come back at market
analysis on the rent is $1,000 we’ll
take 90% of that and say okay we can
make the numbers work at $900 a month
granted this guy’s probably going to get
a th000 to maybe even you know 1,100 in
in rent so we’re Cushing it we’re you
know giving ourselves a cushion on the
on the underwriting side of things uh so
you can have vacant properties and get
into one of these loans the thing you
you can’t do in these is have a
distressed property it has to be as is
can’t be subject to so it’s got to be a
property that uh a renter could
immediately move into and and is livable
got it and to break that down further so
let’s say though you have a lease will
you go up to 100 if you have a sign
lease for $1,000 a month will you go
will you give them credit for that full
thousand or do you still take a little
haircut off that typically no we will we
still look to see what the analysis
looks for uh you know really what we
want to see is is it in a variance that
you know you’re not getting the Unicorn
where market analysis is $1,400 in this
area and you’ve got somebody in there
for 2,000 we’re not going to do that but
we’ll you know as long as it’s within
range yeah we’ll use that lease got it
and to make just sure we can help people
doing this calculation again they’re
going to take they’ve got their Topline
rent number divided by the the debt
ratio but the debt ratio is going to
include principal interest your payment
and then taxes insurance and any other
like if HOA any other that stuff HOA
yeah yeah yep we don’t take into you
know these don’t take into account uh
vacancy or anything like that when
you’re when when you’ve got an occupied
property like a multif family or
something like that but these are yeah
you just typically to me like if you’re
bringing a deal to me and it’s a Debt
Service loan I need to know what the
address is what the purchase price is or
as his value and then taxes insurance if
there’s any HOA or flood um you know let
us know what that is so we can factor
that in but but yeah pretty simplified
loan got it so beauty is yeah you again
investors should definitely run vacancy
and repair percentages in there but that
doesn’t have to count against you to get
this approved correct yeah it doesn’t
factor into The Debt Service got it and
1.2 is solid I know most banks even if
you’re talking to so if I’m going to a
small Commercial Bank getting good rates
like they’re still the same like I’ve
you know what I don’t think I’ve heard
of any I used to hear some people going
1.15 but even a lot of them are more
like 1.25 1.3 now so fact that you guys
can go 1.2 in today’s market it we’ll go
down we’ll go below a 1.20 not on cash
out though so you can do it on you know
if it’s going to be rate and term it’s
going to you’re going to get cut on
Leverage there so 10 is the floor
property has to be above
250,000 and we’re not giving cash out
awesome so cool well we can kind of wrap
on that but kind of I’ll let you get the
last word Darren but to recap you got
covered for fix a flip you guys have
talked about you can do new construction
and then obviously these term loans or
these DSR loans if you want to hold it
as a buying term long-term rental any
other stuff you wanted to kind of share
no the only other thing i’ i’ mentioned
there is that we you know one of our our
other really you know popular products
and big markets that we deal in is um is
the multif family so the fiveo plus uh
we are A bridg lender in that space so
uh what I primarily focus on is value so
usually AC Acquisitions where people are
just like a Fix and Flip but it’s um you
know it’s a multif family property and
we’re we kind of specialize in that BC
area where people are buying distressed
uh or older Apartments Garden style type
apartments and going in and renovating
those and doing the same thing you and I
would do on a flip so that’s awesome
yeah so perfect example guys you seen
the big property we did in Casper where
we bought it we bought 63 units and made
it a lot of work that we were going to
fix up and eventually put long-term debt
on fortunately we were able to find a
small bank that was able to basically
accept that risk but a lot of small
Banks won’t take on a deal like that
right that’s why you would go to
somebody like lima they they feel
comfortable with hey what’s your the
performa and based on the right is that
a how you guys underwrite those deals
yeah we’re underwriting on the perform
on a two-year or threeyear performa and
uh and then and what we’re underwriting
is that performa based on a agency debt
exit so Fanny Freddy exit we want to
make sure that we’re setting you up to
be able to get right into agency debt
and once that’s you know leased out and
ready to go yeah that’s highly valuable
honestly would have been if we actually
I met Darren after we put that deal
together but uh that’s a great product
guys because again it’s not that if you
could find those deals in multif family
the thing is they’re home runs it’s like
I was having this conversation with my
swall bank about like are you kidding me
this is a home run but again they’re
just not set up to do that that’s why a
bridge lender gets you to that like you
say that agency debt on the back end and
then you can get most times get all your
Capital back out and just be doing the
birth strategy it’s scale right yeah
yeah exactly exactly I mean that’s how
those guys got there is uh doing multif
Family Properties that’s why they have
so many doors now those those branded
Turner and those guys so yeah awesome
yeah so first off do you guys um I know
I asked you said you guys have done some
deals in Wyoming so I guess what would
it looked like to get you guys to to
lend on a deal up in Wyoming what you
guys typically
need yeah so I mean the things that you
know when we always hear like H sorry
when we hear Wyoming or you know
something out west I mean one of the
first things that comes to mind is you
know does it fit our credit box and um
you know as long as it does we’re good
you know the things that we try to will
stay steer clear of is rural uh for the
most part and when I say R it just means
more acreage than anything I mean we we
want to see two acres and Below um and
we’ll kind of stay to that Niche what
you know is does it make sense from a
credit standpoint for us to lend on this
property but really if those boxes fit
we’re full steam ahead I mean as far as
whether that’s a Fix and Flip whether
that’s just a straight Bridge or ground
up new construction you know we’re open
to hearing everything as long as it’s uh
you know within the credit box got it
what’s kind of the process look like so
say you’ve identified a property and
we’ll just talk about the first deal I’m
sure it gets streamlined after the next
ones but um as far as like appraisals or
you guys call for inspectors what’s that
going of look like to get closed from
say I’ve got the deal under contract to
closing yeah so I mean let’s just take a
Fix and Flip to to say we’re going to
send two people out uh in most areas
right now we’re condensing that in the
major msas uh to only one visit but
right now so in most markets outside the
majors you’re going to have an inspector
come out he’s going to go through takes
geost stamps pictures sends it back to
us just from a does the reason for that
is does the budget that you’re
submitting match what the inspector sees
for you know damage that’s needed on a
on a property that’s subject to then
we’re going to send in a appraiser route
they’re going to do um you know interior
exterior appraisal and uh and send that
back to us you know as far as you know
turn times on that stuff we’re you’re 5
to seven days uh you know with all the
resi kind of aaper stuff being slowed
down the the turn times on the the
appraisals are much quicker right now so
from there we’re our teams are trying to
close deals in 19 days or less you know
they’ve got an objective to get to a
14-day close so we’re not fastest in the
industry but we’re also not you know
super slow either it’s uh you know we’re
not hard money that can close in 3 days
uh we’re we still have to do some due
diligence uh and the reason for that is
you know we want to deal with hiring
investors uh for the most part we really
want to be you know with those investors
that are kind of rinse and repeat and
doing high volume and then we also
securitize our debt on the secondary
market so we want to make sure that the
due diligence and uh is taking care of
the te’s are crossed and eyes are dotted
got it okay so sounds like not really a
full appr if I’m understanding it’s like
the inspector lining up to make sure
your budget and everything looks good
and then I’m sure you guys are doing
some internal evaluations but you’re not
having to S an appraiser out there huh
yeah we are so that’s that’s what I say
on that in most cases right now it’s a
two it’s two people coming to visit the
property but in some major markets you
know if we were to do one in Dallas we
would just send one you know in some of
the major markets uh we’re only sending
one person out to do that inspection and
so there that’s basically considered a
hybrid so the inspector goes out Geo
stamps the pictures the hybrid appraiser
whether that’s ours or somebody else’s
is doing a you know a desktop appraisal
on that got it okay cool and what is
yeah I guess let’s talk rates too like
what I know it’s always changing but
what’s it look like on your Fix and Flip
product for example points and
percentage yeah it’ll go anywhere from
about a point and a quarter on the fee
to somebody who’s never done a flip in
their life would be two and a quarter um
so and then the Spectrum on the rid side
of things you know those that are doing
you know high volume flips and and
really for us the top two categories are
in the last 3 years have you done 12 or
more and so as long as you’re in that 12
or more flip category the top two tiers
are you are available for you and that’s
uh basically 9 and 1 half uh to 10 and a
half depending on what the you know what
the LTC will end up being and um and
really what uh what the loan size is so
the loan size there’s a few different
loan level pricing adjusters loan size
is one of them that’ll increase or
decrease the the rate there cool awesome
then the other po one that I’ll always
talk to when I I’m interested in I know
other investors would be too is yeah the
loan to values like well how much if it
is a Fix and Flip um I guess our goal is
always to have less capital in the deal
right so we can do more what does that
kind of look like yeah so if it’s if
it’s deemed not heavy rehab so if you’re
not doing anything structural you’re
just kind of doing the your typical
cosmetic stuff whether that’s Cabinetry
flooring paint you know nothing you’re
not doing anything structural you’re not
blowing roof off will go up to
92.5% now if you are you’re going to
hover depending on the you know
depending on what the loan size is again
you’re at 90 or or 85 got it so and
would and you would include the rehab
into that or 100% you fund the okay you
guys would help fund the rehab as well
yeah so we would do uh you know up to we
would do the The Leverage on the
purchase and then we’ll do we’re funding
100% of the construction budget got it
okay and now that’s the other challenge
so again people having to use hard money
or private or just this type of money
before and not used to a bank it’s
always the draw schedule right so how is
it how difficult is it get to to do
draws it and understand the first deal
might be different than the second deal
but you know as you know there are some
hard money lenders that’ll do that and
it’s like pulling teeth to get your draw
and you’re like well I should have
just paid for it by cash Because by the
time I got it i’ already sold it yeah no
I mean the one thing with Lima that’s
really really nice is that everything’s
done in house we’re not using any kind
of third parties for draws or inp CS
everything’s is done inh house so our
construction team reviews the draw
request now the the inspector does go
out there take pictures of it but all
they’re doing is you know you submit a
draw request on our online portal and it
just says you know uh Casey gregerson’s
asking for you know drywall there’s five
items praiser goes out there the
inspector rather goes out there takes
the pictures sends it back to us we
check the box yes those are completed
and then they release the funds so it’s
not you were not asking anybody else to
touch it other than then the inspector
who takes a photo and then the
construction analyst who releases the
funds so it takes it’s just for example
if you put a draw request in on Monday
you should have funds by Friday got it
okay and obviously as completed work per
the scope that and basically estimates
you did okay yep nice yeah yeah it’s
pretty straightforward the other thing
that’s nice is you you have a dedicated
analyst so if something you know
off-kilter or if the inspector gets out
there and you ask for a draw and you by
chance didn’t finish it by that time
that person comes out you can always
just pick up the phone and talk to your
analyst you can call me and loop Us in
and and we help kind of navigate those
things but yeah you you’re not stuck in
you know going through voicemail uh
mazes trying to figure out who’s who so
you have somebody that you can pick up
the phone and and talk to somebody we
also recently just implemented a u an
800 number so like by chance you called
your analyst and they don’t pick up you
call the 800 number and it’s it’s just a
single it’s just a single tree so it
goes to a live human being nice that’s
helpful cool so I like it so yeah that’s
pretty competitive and I guess that’s
the last thing is how hard it is in this
current market right like a lot of
lenders are maybe it’s the or investors
are working with a lender and it’s like
twice as hard now to get a deal like
this done how hard is have your have
yours been yeah I I wouldn’t say it’s
hard to get it done I would say the the
tougher thing is getting the numbers to
line up from are the uh appraisers going
to agree with what you’re after repair
value is you know we’ve seen the market
tighten a little bit to where you for a
while there when everybody was kind of
cranking the appraisers the values were
there they kept searching for the next
one and now I think it’s more the
opposite to where there’s a little bit
of a race to the bottom to where they’re
not sticking their necks out as as far
as they once had and then it’s just to
me when I analyze a deal up front as I
say you know hey I’ll call you and say
hey Casey it looks like it works at you
know the arv you got in here is 375 I’ve
got it it works all the way down to 350
if we if we by by chance somehow go
below 350 it looks like your down
payment’s going to be a little higher
are you okay you want to move forward
and you know kind of play those games
those scenarios out to each other so I
think I don’t I haven’t seen anything
from you know it’s getting harder but I
think those conversations are be
becoming a little bit more prevalent to
make sure that everybody knows the
possibilities that could happen got it
and to make sure I understand it too how
much room on that same deal so say
you’re on that certain tier where you
could get 93 93% loan of value or 92
maybe you said but how much how much
cushion do you guys want to see in the
the actual market value and where you’re
at right or you’re saying like if I buy
a house that’s worth 100 prices for
100,000 or sorry my purchase price is
100,000 but it’s only worth 100,000 are
you guys still going to 92 993 so we
we’re going to be capped at loan amount
will be capped at at either 70 or 75%
depending on the of the AR right so that
and that’s but but if you’re finding a
good deal you’re awarding people which
is which I assume
you’re rewarding finding a good deal to
where you’re actually lending up to 92
93% y AB which is huge I mean as an
investor you’re trying to find banks
that I just it drives you crazy when
you’re like hey I found a deal like it’s
literally appraising I’ve had sometimes
where it literally is appraising right
now for that and they won’t won’t do it
but that’s pretty helpful yeah yeah no I
mean it’s good and I think Lima was
built on the shortterm Fix and Flip
product were really good when it comes
to you know heavy rehab in that where a
lot of people shy away from that that
type of thing where you know if you’re
blowing roofs roofs off or you’ve got
you know building extensions out on
properties or additions we really don’t
shy away from those at all you know we’d
like that because we’ve got the in-house
construction team to to manage that and
and again if that’s if you’ve got the
experience and you’ve done that we’re
good with it you know so you know we
don’t shy away from those at all and
then new constructions the other side of
it too I mean that’s probably the reason
why we got into new construction was cuz
we got pretty good at doing those heavy
rehabs and you know the bigger stuff and
we’re basically doing a new construction
home here that’s you know the next leap
of faith that we can get into from a a
lending standpoint and and right now the
two the two biggest pipelines and have
been for quite some time now and in Lima
are new construction and uh Fix and Flip
absolutely well Casey thank you for
having me man it’s was awesome yeah it’s
been a pleasure having you thanks for
all the insights where could people find
you Darren yeah so I’m you can find me
on LinkedIn uh Darren mcgurn I or just
uh phone number
678551 3103 or uh hit me up on uh
Instagram at darren. murn or Leba I
think it is I’ll have to have to figure
that one out okay we got C that yeah
yeah up there somewhere perfect we’ll
put you in the show notes there and uh
yeah thanks a lot Darren I appreciate it
really helpful yeah Casey awesome
anytime as you may have learned by
tuning in to this episode of Gregor
sense the easiest way way to make real
estate investing hard is by going at it
alone so as you continue learning and
seeking knowledge of the industry I want
to encourage you to build relationships
with other professionals who are
passionate about real estate whether
that’s an agent a business owner or a
managing investor like myself there are
Pros that want to see you succeed and
are willing to help you by sharing their
experience you can always reach me by
visiting Casey greers.com and scheduling
a call I look forward to connecting with
you and continuing to share my
experience with you here on Gregor sense
mobile until next time I’m Casey
Gregerson thanks for tuning in