119: Hard Money Loans for Fix and Flips with Ben Shaevitz
I have gotten two hard-money loans in my 16 year career as a real estate investor. I obtained both this year from Ben Shaevitz with Patch of Land. I shy away from hard-money loans because of the high rates, hoops you must jump through, and length of time it can take to get the loan. However, I worked with Patch of Land because they were able to eliminate many of those difficulties.
The thing that really helped me out was they did not require a full appraisal to get the loan completed. Not only did they lend to me without an appraisal, but they were also able to complete one loan in less than a week, which helped me get a deal I may not have been able to get otherwise. On this episode of the InvestFourMore Real Estate Podcast, I talk with Ben about Patch of Land. We discuss how he got started in the business and why I decided to finally use hard money.
Why did I decide to use a hard-money loan over other financing?
I have never used hard money before this year. I have a number of financing options, including local banks, private money, and my own money. The rates on my fix-and-flip loans from local banks are under 5%, but I must put 20% down and pay for all the repairs out of my pocket. I love private money because it involves sending a text to my buddy that asks if he wants to loan on a certain house, and he usually responds “yes” within about 10 minutes.
Private money is more expensive (in the 10% range). In the past, hard-money loans had even higher interest rates, but they have come down significantly. I have gotten two hard-money loans with rates under 9% and with less than three points. Even with rates getting lower on hard money, almost all hard-money lenders require a full appraisal to be done before they will lend on a house. In Colorado, it was taking up to three weeks to get an appraisal, and most deals I get need to close in three weeks or less.
I ended up meeting Ben Shaevitz at a real estate conference and became very interested when he mention they would do hard-money loans without an appraisal! I did one loan with him earlier this year on a wholesaler deal I found. I did another loan with him on a deal last month when I had to close in five days. I had a seller who had listed their house on the MLS. I made an offer, but the seller decided to take the house off the market. A week later, the seller’s agent called me and said they wanted to sell the house again but needed to close in 5 days! I emailed Ben on a Sunday asking if he could close the deal by Friday, and he said yes. I was a bit skeptical, but they got it done.
How does Patch of Land hard money work?
Patch of Land has been in business since 2013, and Ben started working with them in 2015. Ben had been a conventional lender for many years and did very well, but he was looking for a change. Ben helped Patch of Land grow to the point where they did $170 million in loans in 2016. They focus on lending to fix and flippers but also have bridge loans for rental properties and other projects.
Here are some of the basics on their hard-money lending:
- Rates vary from 8 to 11% based on experience and the deal.
- On loans that are less than $250,000, they do not have to do a full appraisal.
- They lend on 85% of the purchase price and up to 100% on the repairs.
- They lend in 46 states.
- They will lend to investors with no flipping experience.
As I mentioned before, the two things that really attracted me to Patch of Land was they do not require an appraisal and their rates are very competitive. It also helped that Ben and I both graduated from The University of Colorado the same year and even were at the same dorm at that same time (we did not know each other)!
How can you contact Patch of Land?
Ben is very easy to get a hold of and very responsive (I can confirm that because responded to me on a Sunday)! You can call Patch of Land at 888-605-6326, or check them out here: Patch of Land. They can help with many types of financing on many types of projects.