What You Missed August 2014 General Meeting
by Rob Earhart
Show Me The Money
Presented by: Roundtable Discussion
The participants were: Jon Doss, Justin Thompson, John Parrett, and Chuck Collova
August 5, 2014
Justin described his charges as 3.5% front end fee, 20% down, and 12% interest. They fund fix and flip, single family 1-4 units, 65% of LTV, loan term is 13 months. No hidden fees. “We have a team of third-party appraisers who look at comps and construction process and we also have a team of draw inspectors and pay within 24 hours,” described Justin.
John Parrett of Bridgwell Capital. “My specialty is providing capital but three quarters of my time is educating and assisting investors,” says John. Usually the first property they bring me is not a good deal but I do a lot with the second one. If we don’t see a clear win for you, we will point you in the direction that will make you money. How do you make money in real estate investing? You can use change of use by fixing up a dilapidated unit or make money with appreciation and cash flow. If we won’t fund it, you are probably better off without it. You should be buying and flipping and buying and holding. We have great terms and great rates and local. “If you find a good deal, call us, and we’ll check it out,” advised John.
Jon Doss of Secured Investment Lending, based in Orlando. “We lend throughout Florida and offer rehab loans at 2.75% on closing, 65% of LTV, on a 1 year loan.” “I just put $10,000 down and rehabbed it and put $30,000 in my pocket,” proclaimed Jon. “We know the areas that we lend in and can advise you because we have probably done an appraisal in that area.” Be realistic on your deals because we want you to succeed. We have other types of loans available. If your renter wants to buy but cannot qualify with a bank we can do a 15 year loan and we can close in one week from application date.
Chuck Collova of C & C Financial. “I bought my first house in 1967 and have done hundreds of deals,” exclaimed Chuck. “If you just do flips you do not build wealth, but if you hold one of four you will build wealth,” advised Chuck. We do not typically get appraisals, but check the property ourselves. We do owner occupied. The reason people had to get out of the business is the Dodd Frank act. “Banks are afraid to screw it up but we know how to work with the act,” advised Chuck. There is a 43 % debt ratio for an owner occupied. Most investors don’t want to tie up money for 5 years or more but we have some who do. We don’t loan in rough areas because you can get burned. If you won’t get out of your car at night, it’s not a good area. You can get cash flow, but it’s not worth it.
“Dodd Frank does not allow a prepayment penalty,” advised Chuck. The rates on owner occupied are 12–15% for 5 to 15 years. Commercial deals are 12-13%. WE do deals in Jacksonville and do a lot with NFL players. Since the crunch a lot of people are upside down and have issues. We get calls all the time from guys who had no skin in the game because of perceived appreciation, though it was not there. They had no one to flip it to and walked away from dozens of properties. If you are borrowing money you will sign personally even though it’s in a trust. We know the deals and are at 65% of LTV and we want skin in the game. The market value is typically the lower of market or appraisal. When you do a loan, you will make monthly payments because the lenders want a cash flow.
The panel then took questions from the audience:
What do you have over the banks? Chuck: “Bankers are my best friends, just try to get a loan at a bank now. I get a lot of business from them. Because they are strict in their lending processes.”
What is a typical deal? ”Say you want to purchase for 100k, rehab and sell for 150 k. You will put in $20k we will put in $80 k. The origination fee is 3.5%.”
How would you get a million dollar line of credit? “You would have to have a million in the bank.”
Do you use paying notes as collateral? “We could on a commercial deal but would look at the notes to see how they are paying.”
Subprime is coming back? “We have some subprime and they are fixed rates.”
Does anyone invest in mobile homes? Chuck says “We do, but since Colonial Bank was closed down, things have been tight. Mobile homes depreciate but the land may appreciate. We watched the prices of mobiles drop and it’s hard to get back into that market.”
What do you see in the Tampa Bay area as far as appreciation? John: “I am positive about this area. We have great weather, sand and sun and a lot of money is coming into this area. Orlando is supposed to appreciate 35% in the next few years. ‘Inside the loop’ is the core of the metro areas that did not depreciate as much as the ‘outside the loop.’ Check into the ‘A’ and ‘B’ neighborhoods. They will go up.”
Chuck: “After this year with the bad weather in the North there will be more people relocating here for the weather. There are many people who have not made a payment because the original note is not available but there is a bill in congress to allow a certified copy to suffice. If that passes there will be hundreds of houses available. Interest rates will have to go up.”
Where do you want to buy your rental houses? John: “You can identify small upwardly-transitional areas that are appreciating. There are ‘A’ neighborhoods that are good investments. You can’t buy 25k houses and get good tenants. Good school zones, shopping areas. Get all your leases to expire on June 30 so you can get good tenants. Buy all your houses in that area and you can see all your houses in one afternoon. Keep them close.”
The panel was thanked for their assistance and participation, and the members stayed around for more questions.