092: Financing Flips and Rentals With Lima One Capital
On today’s episode of the InvestFourMore Real Estate Podcast I interview Courtney Newmans of Lima One Capital. Lima One Capital lends money to fix and flippers as well as rental property owners. They are currently lending in 44 states and working on getting approved in every state in the U.S. Courtney actually started working with Lima One because he applied for a loan with them as a house flipper. Courtney liked how they did business and ended up getting a job with Lima, but still invests himself. I discuss many topics with Courtney including how he got started in real estate, what loans Lima One offers, how the loans work, and much more.
Who is Lima One Capital?
Courtney explains how Lima One started about 4 years ago as a local hard money lender. Lima was licensed in four states, but has since been licensed in all but 6 states. When Lima One started, the hard money lending world was much different. There were just a few national lenders and interest rates ranged from 14 to 18 percent with the investor paying 2 to 5 points on the loan. In the last couple of years the rates and fees have come down a lot due to increased competition. I have personally seen rates drop down to 12 percent, then 10 percent, and now there are multiple companies offering hard money loans below 9 percent with 2 points or less. To get the best rates you have to be an experienced investor, but even rates for beginners are much lower than they have been in the past.
How does a hard money loan work with Lima One?
Hard money is great for fix and flippers. Banks do not like to lend to flippers because they feel the loans are riskier and they like longer term loans. Most flippers only need a loan for 6 months or a year. It is possibly to get a short-term loan from a bank, but they are usually local banks. Many of the local banks will only lend money to experienced flippers. Hard money loans were created to provide financing for flippers who don’t or can’t use banks for loans. Hard money loans typically have higher rates than local banks, but they may finance more of the purchase price and repairs. Lima One has programs that will finance 90 percent of the purchase price and up to 100 percent of the rehab. Lima One’s rates vary based on the investor’s experience, but can be as low as 7.9 percent for extremely experienced flippers. Hard money lenders will not lend you all of the money at once, but use draws to finance the repairs once they are completed.
You can find out more about Lima One’s hard money lending program here:Â https://limaonecapital.com/hard-money-lp-1/
How does Lima One’s rental property financing program work?
Rental property owners have issues getting financing or refinancing their properties as well. Many banks do not want to finance more than four mortgages and there are very few that will finance more than ten. Banks usually have very strict criteria for credit scores, and debt to income ratios with investors. Lima One naturally has some restrictions on credit score, but they can be much more flexible than a bank with investor loans. They do not even look at debt to income ratios and require just a 600 credit score. They are not qualifying the borrower as much as they are qualifying the investment.
When you work with a national lender like Lima One, they are going to have slightly higher rates than a traditional bank. Their loan programs for rental properties include 30 year fixed rates from 6.5 to 8.5 percent. They will refinance up to 75 percent of the value of properties and up to 80 percent of new purchases.
You can also find out more information on their rental property program here:Â https://limaonecapital.com/hard-money-lp-1/
Will Lima One work with new investors?
Many new fix and flippers run into a catch 22. They want to get financing for a flip, because they do not have the cash to purchase and rehab a home. However, most lenders will not lend to flippers who have no experience. How can an investor gain experience if they cannot get a loan? Lima One will lend hard money to brand new fix and flippers. They will even lend money to investors who have never done a deal.
What else does Lima One Capital have to offer?
Not only does Lima One offer hard money, and rental property loans. They also offer new construction loans, and bridge loans. I have personally met Courtney at real estate conferences as well as many of the Lima One team. I know many investors who have closed loans with them and been very happy as well. I have been able to finance most of my deals with private money and local bank money, but they are a great option if those sources are not available. Again you can check some of their programs here:Â https://limaonecapital.com/hard-money-lp-1/