Ask Cornerstone

Ask Cornerstone: How do prepare a business plan to build trust with a hard money lender?

Hard money lender application trust

Hard money (HM) lenders do differ in how they lend depending on their business model, risk assessment methods, capabilities, and willingness to solve problems, but in most cases, they are equity lenders. That means that they look at the size of your down payment and the quality of the property to protect their capital. Lenders want to know that if the borrower completely screws up and the lender must foreclose that there is enough equity to cover the cost of foreclosure, carrying cost, sale cost, and the cost of getting the property ready for sale. Some lenders don’t have the desire or resources/capabilities to take over an unfinished foreclosed project, […]

Read more

Ask Cornerstone: Can I raise a down payment for a flip from a private money lender?

Borrowing loan deposits

I would like to get a loan for a flip from a conventional bank, but I don’t want to put any money down.  Is this one of those cases where, without “skin in the game,” I won’t get approved?Do I have a better chance with a portfolio lender?   I’m trying to leverage as much possible to have to come up with the least out of pocket as possible. Yes, your assumption about needing “skin in the game” is correct.   The bank will see / know that you are recording a second on the property, and therefore are putting the down payment from a loan.  The same is true through a […]

Read more

Ask Cornerstone: What is the best way to finance the construction of a single family residence?

Financing a SFR with a construction loan

What’s the best way to finance the construction of a home that I intend to keep as rental property? I am a real estate broker and found a good deal on the land I purchased (self-funded).  I’m looking to invest in improving the property but I would need financing. What type of funding is available? My partner and I will be doing the application and we both have excellent credit. The best source for a small construction loans are usually small, local banks. I recommend to first talk to a bank’s loan officer and to get the requirements in their “Loan Request Package”.  Be thorough with completing the application so […]

Read more

Ask Cornerstone: How do I structure a deal by partnering with family member private money lender?

financial partnership with a family member in flip

I’m a new Real Estate Agent and I want to start fixing and flipping with a family member who will be the financial backer.     How should I structure the partnership if they will be fronting all of the money and I’ll be the project manager and real estate agent on the deal? Would I be making the commission on both the buy and sell of the property and the family member would be putting up all the money for purchase and construction costs? How should I structure the partnership?   Are the profits split equally?   If I were the money person, I’d want a bigger percentage of the deal since it […]

Read more

Ask Cornerstone: Strategy to raise capital through current assets?

Raising capital strategies with current assets

My wife and I are new to the United States.   We own two properties and need some ideas to get cash together for future investments.  We’re cash poor right now and have limited income, but we have the following assets: Single Family Home: Its value is $950,000 (purchased in 2009 for $710K) and it’s fully paid off. Muti-Family Home: Its value is $1,000,000 (purchased in 2001 for $780K) and it’s fully paid off. The multi-family home clears about $5,000 a month in income. It’s our only source of income given we only have a residency visa right now.  We want to increase cash flow by flipping cheaper single family homes […]

Read more

Ask Cornerstone: What is the difference between interest rates and points?

Explain Interest Rates vs Points

Hi Jorge, A point is a fee paid upfront at closing for a loan. It is equal to 1% of the loan amount. One point on a $100,000 loan equals $1,000 (ergo, 3 points equals $3,000).   The interest is the ongoing cost (computed as a percentage) which is charged for the use of money. It is expressed annually and calculated into your periodic (usually monthly) payments. Depending on the loan, you could be paying interest only, or interest plus payment towards the principle. It is good to remember that high interest rates hurt you more in the long term loans, while high points hurt you more in short term loans. […]

Read more

Ask Cornerstone: How to get proof of funds and close a deal quickly?

proof of funds

I’m confused about at what point I should be looking for a private / hard money lender. I’m looking to buy properties from wholesalers and other sellers. Wholesalers usually want proof of funds (POF) to get into contract on a property. To close the deal quickly, one would ideally need to have all the cash required in the bank. Outside of that, a hard money lender wants to see the deal first before they will give the proof of funds letter. It seems like a Catch 22… the seller wants POF to get into contract, but the lender wants a contract to give POF! Can I eventually develop trust with […]

Read more

Ask Cornerstone: How do I know if it makes sense to take a mortgage on my property?

Mortgage Finance Decision

I bought a duplex in Pittsburgh with cash. Now I am applying for a delayed financing exception mortgage. How do I know if I should get this loan or just keep my cash in the investment? These are the terms I received from my local bank. Would doing this be too expensive? The duplex appraisal value is $60,000. I’m applying for a 70% LTV 30 year fixed conforming loan of $42,000. The interest rate is 5.00% with 0.125 points. Total closing costs are approximately $3,140. Response: Assuming that this is best 30 year loan one can get in your area and you are not going to hold the property as a […]

Read more

Ask Cornerstone: Can I find private money loans at a lower interest rate if it is secured by a first trust deed?

private money loans secured by a first trust deed

Can I find private money loans at a lower interest rate if it is secured by a first trust deed? I own two properties free and clear. I’ve been running ads in online classifieds offering people 4.5% for a loan secured by a first trust deed on those properties. I have good credit and the loan is 60% the value of the property. I don’t know why people will hold money in the bank at 1% but don’t consider a 4.5% low risk loan secured by a first trust deed.  Are there any other techniques to getting private money loans in a situation like this without the points, cost, high […]

Read more

Ask Cornerstone: Can I get a no-money down hard money loan with good income and credit scores?

No Money Down Hard Money Lender

My family and I have been studying some books on how to project plan and renovate homes for flipping. Our goal right now is to find a good hard money lender that can work with us.  My situation is that my family are residents in other states, outside of California where I live. They will be applying for the loan because they probably have sufficient income to qualify. My role, living in California, will be finding the property and making the purchase since I’m a real estate agent that can do the buying and selling. We are also researching a few contractors to help in the remodeling process.  We are […]

Read more