what is the most important part of the hard money application?

hard money or private money has different requirements than conventional or bank money

Because hard money lenders have a different focus than bank money, the weight of different elements of the application is varied.

A hard money lender wants to focus on the deal - tell us about the property. This is a part of the application that the lender will want you to be an expert on. It will give them pause if there are questions you have not thought about or you don’t know. Things to consider:

1. Purchase Price or Maximum Offer Price

2. After Repair Value - what will it be worth after you improve it?

3. Exit Strategy

   1. will you be fixing and flipping the property? your exit strategy is the sale.

   2. will you be improving and renting the property? your exit strategy may be a refinance.

   3. are you expecting another property to sell or a large cash inflow? you may be planning to pay off the loan direct with the lender.

4. What are your planned improvements on the property? And what will that cost?

   1. are you adding square footage?

   2. replacing appliances?

   3. repairing structural issues - like roof or foundation?

   4. if you are improving vacant land, have you met with the building authority for what they will require and what entitlements will cost?

   5. based on the comparable properties surrounding the area, what do the improved homes have that your home needs?

5. Do you have reserves for if things are more expensive or go wrong? any built-in contingency plans? are there things you can save on without affecting the future repair value?

You can make your future lender feel more comfortable by being an expert on your deal. They will place less weight on your personal financial picture. If you don’t know an answer, just make sure that you can get that information to your lender in a timely fashion. Do not make up an answer if you don’t know it. If there is a problem on the property in the future, your honesty will be very important to your lender. This will make for a much better working relationship.

What is Hard Money Lending?

you’re looking to invest in real estate and keep hearing about hard money lending or private money lending, but what is it?

Hard Money Lending Myths

IT'S OUR BIRTHDAY!

how do you keep your tenants happy?

Goal: Keep Long Term Tenants Who Pay Their Rent

tenant washer / dryer

To accomplish this goal, keep them happy. Here are some ways to consider doing that:

1. Make it easy to pay rent. There are online services that allow renters to pay through a web portal - often this will add the fee to the renter’s side of the transaction. Here are some options, but there are many out there for you to look into:

   Pay Your Rent.com

   Rentler

   RentGroove

2. Consider allowing a reasonable amount of pets - especially in Colorado where many folks own dogs or cats. It is a very important component for them choosing a place to live.

3. If possible, add bathrooms. Renters will prefer a place with a bathroom per room rather than shared.

4. COMMUNICATION - Most problems stem from poor communication. If you’re trying to set someone up for a repair for instance, communicate the timeline so that they aren’t left wondering.

5. Consider offing a renewal incentive, if you have a good tenant you would like to keep. Good tenants are worth their weight in gold.

6. Let tenants know kinks about the property and how things work. Hopefully this will lead to fewer calls later about where to shut off water or power etc. Let them know how to look up if there is a power outage in their area rather than something wrong with the home. You would be surprised, but people aren’t always familiar with how to check.

7. Do not over-inspect the property. Give tenants pace and provide them notice if you need to come by.

8. If you raise the rent on a tenant who stays, consider making an improvement at the same time as an incentive.

9. If possible, don’t get the cheapest appliances - they won’t last as long. Consider getting a warranty should repairs be necessary.

how to secure vacant properties

Keep Your Investment Safe

Investment Property with Security Door

• Maintain proper insurance - vacant property policy

• Cover street viewable windows - there are inexpensive options if you do not want to install permanent coverings

• Alternate lights left on - can be done physically or devices set up

• Lock Gates

• Make sure all doors lock. Add piece of wood to sliding glass doors

• Keep construction supplies & equipment out of view

• Post beware of dog sign

• If vacant during winter, winterize the home to avoid potential damage

• Perform regular maintenance

• Post sign for a security company even if there isn’t an existing alarm

Hold It or Fold It - Getting Started with Rental Property Evaluation

If you are new to real estate investing, there are some things to consider when buying an investment property.

First - Consider the location of the property. Is the property in a desirable part of town? Is it an area with with many tenant opportunities? Is it near public transportation? The area will also determine what the property can rent for. Be sure to look at what neighboring properties are renting for and note their condition.

Property Due Diligence -

Repairs : what repairs will you need to make in order to make the property rentable? If you are used to flipping, there are different repairs that will be necessary if you are now planning on renting. Such as being able to get away with not including some appliances when flipping, but needing to provide those to make tenants choose your property over others available. What repairs are necessary for health and safety of your tenants and to limit your liability as the owner?

Holding Costs : what will insurance, taxes, vacancy, utilities, etc cost you over time? What will you need to reserve for any repairs?

Financing : what financing are you able to get? how much will you be required to put down? and after all of that, will the property cash flow. Not only will you want your investment to cash flow, but your lender will feel more comfortable providing financing to you if your investment “pays for itself”. Hopefully in addition to the monthly cash flow, your property will appreciate over time. This will allow you to sell for a profit on top of it generating monthly cash flow to you over time.

You will hear us preach this time and time again. But money is made on the buy. Make sure you do not get excited about a seller, wholesaler or agent’s sexy numbers of what you can rent a property for. Be sure you do not overpay for the property.

Be a good landlord - if you can keep tenants in the property for long periods of time rather than needing to get new tenants constantly, it will make your life and your wallet better.

TABS provides financing to landlords in Colorado. And our management team has been a landlord - we are happy to counsel you if you are just getting started.

Good luck!

Homeowners Associations

first - what is a home owners association? a real estate developer will generally set up a home owners association in a master planned community. this association will determine rules or covenants for the people who live there, generally to keep the look of a community consistent and to make sure that everyone keeps up the neighborhood - removing trees that are dead, not keeping a recreational vehicle parked for an extended amount of time or changing the paint color unless approved. the HOA will also collect assessments from the home owners in order to maintain common areas. The developer will generally be a member of the HOA until an agreed upon number of homes are sold. A recent development in Colorado is that an association must be managed by someone or an entity with a CAM (community association manager) license. This is generally necessary because the management of the HOA handles funds from sometimes a sizeable amount of people and those need to be properly accounted for and disbursed to protect the owners who live within the community. 

another consideration in properties with home owners associations, is whether or not a traditional lender can provide financing. there are instances, such as the case, with non-warrantable condos where a portfolio or alternative financer would be required. a non-warrantable condo could exist for example if there are more owners within a community who do not occupy their property as their primary residence than people who do. this information is provided by the homeowners association. some banks find these loans riskier than a community that is a majority owner occupied. if you do find aproperty within one of these subdivisions, also consider your exit strategy. will your end buyer be able to get financing? or does this limit your pool of buyers?

real estate investing is all about whether or not a deal makes financial sense, unlike your primary residence where there is an emotional element: a desire to be in a certain neighborhood, near a certain school, a property with blue shutters, whatever the case may be. homeowners association dues can be pricey, especially in communities with extra amenities such as clubhouses, pools, fitness centers or golf courses. homeowners dues could rise. these liens also take a superior position to any loan should you not pay them which would be of great concern to your lender. when evaluating a property, it is always wise to think of multiple exit strategies. should this house not flip, what do i do? if the market changes, how do i deal with this property? think of these items: will you be able to rent out the property if needed?  would i be able to re-finance my hard money loan? 

we are here to help and call attention to these issues as they are discovered. not only do we have experience as being a hard money lender to colorado investors buying properties with home owners associations, but we have developed projects and set up these homeowners assocations, been directors of their boards of directors. if you ever have any questions, we are here to help!

structural issues in colorado

Colorado is known for its "special" soils. If you are coming from out of state, you might not be as familiar with swelling soils. This is something that is very heavily disclosed in new construction from home builders, but not as common in resales. I've included a link here to the Colorado Geological Video regarding Swelling Soils:

An educational video about hazardous soils in Colorado; includes collapsible or compressible soils and swelling or expansible soils. This geologic hazard causes more damage in Colorado than any other. Covers types of damage, prevention, mitigation, safety hazards, economic losses. Produced by the Colorado Geological Survey - www.colorado.gov/geosurvey

This is something to be aware of when purchasing real estate in Colorado. There is a chance that in the lifetime of the home you are purchasing, it may have shifted, may have some sort of compromised foundation. This is fixable, but will be more expensive and generally scare off a new investor. Experienced investors who dabble in homes with foundations know that there is a high risk but potential high reward when fixing and flipping these properties. Some institutional lenders or even hard money lenders in Colorado may shy away from homes with structural issues. Here are some things you need to keep in mind: you will need a qualified structural engineer, a qualified structural contractor, you will need to disclose these issues to potential buyers and you will likely need to come in under market for it to sell. But this also means that you should be able to purchase these homes at a very steep discount if there is existing structural problems that the owners are not willing or able to fix. Proceed with caution and get your ducks in a row. As always, let us know how we can help. We are a Colorado Hard Money / Private Money Lender with tons of experience!

what should you diy?

As a Flipper, it is beyond important to keep costs low. One way of doing that is to perform some work yourself. If you happen to have a career in construction, this is a no-brainer. But for many flippers, this might be your first experience building something yourself. Working for you is the ability to access tutorials online or in person. YouTube has endless videos for just about any piece of the rehab project and Home Depot offers free classes if you found a topic of interest to you. Always consider if your work will not be up to the quality necessary for the home to fetch top dollar. Some ideas for just getting started are below, but as you educate yourself more, the options are endless to how you can save yourself money. 

• demolition
• light landscaping, tree trimming, lawn maintenance, clean up
• some painting
• install hardware on cabinets
• install doors
• hang mirrors
• install towel bars
• post-construction clean up
• light staging