Success Story: Retired Lady in Salt Lake City Rehabs and Sells Her First Investment Property
When she first came to me with an investment property she wanted to fix up and sell, Doreen Harlsway of Salt Lake City, now retired and 71 years young, had just completed an expensive training course on real estate investing. At first I eyed her with skepticism, of course, wondering if she thought this was going to be an easy ride.
She was buying in a neighborhood in Salt Lake City, Utah called “Sugarhouse,” that scores big points the B to C buyers. Her ARV was $145K and she was buying at $94,000. Rehab was $9K. Her partner in the deal was to oversee all of the rehab. The comps for the ARV checked out, as I know this area well, so I was intrigued by the deal. I met with Doreen and her partner, and they seemed like they had the best intentions and the right answers to my questions.
Well, the retired lady Doreen, was nervous as a hen nearly every day after the purchase closed on the house. She had a big chunk of her retirement cash locked up on the deal. But luckily, her partner made sure the rehab was completed in a little over 3 weeks and the property was listed this Spring for $150K. Spring flowers blooming on the little sidewalk out front, and the grass already full and green, Doreen accepted an offer for $145K with only 16 days on the market!!
Doreen has since paid us off, and now she’s celebrating big time. She’s a lot better off on her retirement nest egg on this one, little real estate deal. This is what I call a success story. Congrats Doreen!! She could not have qualified for a traditional bank loan to do this. We provided her with a real estate loan or private money loan, to make the deal happen. Click here to find out how you can become qualified for a real estate loan quickly and easily.
Top 3 Reasons a Hard Money Lender Will Turn Down Your Real Estate Deal
I recently did a survey of all of the hard / private money lenders I know in the industry. I also posted the survey on LinkedIn to get answers from the hard/private money lenders I don’t know. The question I asked these lenders was pretty simple:
“What are the top 3 reasons you decline a real estate deal when the numbers make sense?”
Although I received a lot of different answers to this question, there were 3 top reasons that kept appearing from the majority of the hard money / private money lenders I surveyed.
1. Neighborhood: The property is located in a high crime or extremely distressed area. Sometimes this is where the good rehab properties are found, but if a lender is afraid to get out of his car without a gun when he/she does the site inspection, you most likely won’t get a hard money loan on it.
2. Location: The property is located outside of a major metropolitan area in a rural location where there are no sold comparables within 2 miles of the subject property. Hard money and private money lenders prefer to lend in major metropolitan areas over rural locations. Although a real estate deal in a rural area may look good on paper, if there aren’t sold comps nearby to support value, a hard money lender may turn it down. Also, smaller market, smaller pool of buyers. There are exceptions of course.
3. Borrower’s Cash Reserves: Particularly on a rehab loan, a borrower who seems to be grossly undercapitalized is a sure decline. Lenders want to make sure a borrower can cover any shortages in construction, or in case of a low appraisal for the refinance.
If you are a borrower who has been turned down for a hard money loan on a deal that penciled on paper, please share your experience. If you are a hard money lender reading this, please share your own top reasons for declining a real estate loan where the numbers made sense.