https://u109893.h.reiblackbook.com/generic11/the-storage-stud/when-should-a-real-estate-investor-use-hard-money-brandon-moulton/
According to Fernando’s guest, Brandon Moulton, there are three primary reasons for a real estate investor to use private money.
1. Speed.
2. Dilution of partners.
3. Real-world underwriting.
2. Dilution of partners.
3. Real-world underwriting.
If you are curious and want to understand more about these reasons given by Brandon on “when should a real estate investor use hard money”, just continue watching the video.
Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,
Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,
Find out more at
https://www.TheStorageStud.com
https://titanwealthgroup.com/
Listen to our Podcast:
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Fernando Angelucci (00:00):
When should a real estate investor decide to use hard money? One of the reasons I'm alluding to right now is obviously speed. What might be another reason to use hard money?
When should a real estate investor decide to use hard money? One of the reasons I'm alluding to right now is obviously speed. What might be another reason to use hard money?
Brandon Moulton (00:22):
Yeah. So I would say there's really three primary reasons. One, you just touch on, which was speed. Two is dilution of partners. So, within private money, we're willing to go higher, advancing, advanced higher under the capital stack. So, that you have to take on less partners. I think we talked to a lot of folks and it gets pretty old pretty quick. When you're the one finding the deal, running around, chasing the contractors and then selling it and maybe your rich uncle put up all the money, but you split it half at the end, that kind of gets old, after you do it a couple of times, given the amount of work and how hard it is to find these projects and then bring them to completion.
Yeah. So I would say there's really three primary reasons. One, you just touch on, which was speed. Two is dilution of partners. So, within private money, we're willing to go higher, advancing, advanced higher under the capital stack. So, that you have to take on less partners. I think we talked to a lot of folks and it gets pretty old pretty quick. When you're the one finding the deal, running around, chasing the contractors and then selling it and maybe your rich uncle put up all the money, but you split it half at the end, that kind of gets old, after you do it a couple of times, given the amount of work and how hard it is to find these projects and then bring them to completion.
Brandon Moulton (01:08):
And then the third, I would say is real-world underwriting. So there's more understanding around kind of maybe, you know, some bumps in your credit or maybe your tax return yourself employed. So, it doesn't look, you know, as the way a bank would like it. So, just having that general understanding and the ability to have the conversation, I think, is a big driver of why folks like to use private money.
And then the third, I would say is real-world underwriting. So there's more understanding around kind of maybe, you know, some bumps in your credit or maybe your tax return yourself employed. So, it doesn't look, you know, as the way a bank would like it. So, just having that general understanding and the ability to have the conversation, I think, is a big driver of why folks like to use private money.
Fernando Angelucci (01:35):
Yeah. I know when we were flipping properties, one of the things that was always tough, especially in the beginning was when we went to a local bank, they wanted 25 to 35% down of the purchase price. And then, anywhere from 50% or more of the rehab, we had to fund ourselves in some banks even quoted me that I had to put all the rehab dollars in. So that's a lot of cash out of pocket.
Yeah. I know when we were flipping properties, one of the things that was always tough, especially in the beginning was when we went to a local bank, they wanted 25 to 35% down of the purchase price. And then, anywhere from 50% or more of the rehab, we had to fund ourselves in some banks even quoted me that I had to put all the rehab dollars in. So that's a lot of cash out of pocket.
Fernando Angelucci (01:59):
Say you have a prime plus borrower, everything looks good. He has decent credit, you know, good experience, you know, what can they usually look to be putting down on both the purchase side and on the rehab side?
Say you have a prime plus borrower, everything looks good. He has decent credit, you know, good experience, you know, what can they usually look to be putting down on both the purchase side and on the rehab side?
Brandon Moulton (02:13):
Yeah. So we look at the deal on a total cost scenario of what your acquisition cost is and what your rehab cost is. And then, we would be funding somewhere between 80 to 85% of that total cost. Meaning, you'd have to come in with 20 to 15% down. Now, pre-covered, were going up to even 90. I'm sure we'll get back to those days at some point, but we're not there, right now. So 15 to 20% of the total costs is what you can expect for somebody that's got some experience and some good track record.
Yeah. So we look at the deal on a total cost scenario of what your acquisition cost is and what your rehab cost is. And then, we would be funding somewhere between 80 to 85% of that total cost. Meaning, you'd have to come in with 20 to 15% down. Now, pre-covered, were going up to even 90. I'm sure we'll get back to those days at some point, but we're not there, right now. So 15 to 20% of the total costs is what you can expect for somebody that's got some experience and some good track record.
Fernando Angelucci (02:53):
And then, as far as ratio to let's say total ARV, what's kind of your guys stop limits as far as how far you'll go up on a deal?
And then, as far as ratio to let's say total ARV, what's kind of your guys stop limits as far as how far you'll go up on a deal?
Brandon Moulton (03:03):
Yeah. It's a pretty straight forward between 60 to 70%.
Yeah. It's a pretty straight forward between 60 to 70%.
Fernando Angelucci (03:07):
Okay.
Okay.
Brandon Moulton (03:08):
On the back end so that you can get out of it and move forward.
On the back end so that you can get out of it and move forward.
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