Private Equity Lending Before & After Your Purchase Presentation & Panel Discussion for the Baltimore Washington Investor’s Meet Up September 9 th, 2015

Your Host: Joseph Child

*Easy – No Notes … Instead 4 easy steps *Open up your cell phone to Contacts+Add *Under Name, type “Joe says so, text” *Under Mobile #, type *Save … & then text me your request! ( … include your address & I’ll put you on my “Joe says so …” Update )

Private Equity Lending, Hard Money, Portfolio Lending … There are subtle & important differences but, for our purposes tonight we will put these all in the same category.  We are not talking about Conventional Bank or Agency Mortgage Lending, (FHA, VA, FNMA or FHLMC)

There is a reason …  We are not talking about Consumer/Borrower End Lending  Consumer, End Lending has way more regulation and the rules are strict -ie: licensing, disclosure. Red Flag: Don’t seek Private Equity, Hard Money Loans for self funding a project you are going to occupy.

That’s Why You’re Here... The Baltimore Washington Investor’s exists to help you further your Property Investment Goals & Portfolio through seasoned resources

Show me the MONEY ! So, you are at that point in the journey where you have some seed money, some general knowledge … You are ready to Press Go …

You Talk to A Few Private Equity Lender’s … and what do you see ?

STOP, Relax … Think about what you learn tonight. General Rules for Private Equity Investment Property Acquisitions – The Baseline:

General Guidelines Private Equity typically lends: On the performance and numbers of the property & the market. With less emphasis on the investor/borrower, the borrower's credit or “day job” income.

The RISK Determines Caps Baseline Numbers Acquisition Cost, which is … (Price + Renovations ) … and After Renovation Value (ARV) or LTV 75% - 80% of Acquisition Price (Purchase Price and Renovations)

Yea … Math Example ! Property Purchase Price = $125,000 + Renovations $75,000 Acquisition Cost Total = $200,000. (80% of $200,000 = $160,000 in Proceeds) The Math is easy … Getting the Purchase Details & Renovation Costs working for YOU is the heart of the deal !

RISK Determine Caps … Continued OR … 65 – 70% of ARV (After Renovation Value) Whichever is LESS So, YOU say the property is worth $235,000 after it’s renovated. Your Acquisition (Purchase + Rehab) was $200,000 / 80% of Acquisition was $160,000 …

RISK Determine Caps … Continued However … 65% of the $235,000 ARV is only $152,750 – That $152,750 is the BASELINE loan amount cap that most Private Equity Lenders will lend. By these numbers you would need $47,250 CASH for hard costs in this property investment.

But wait … There’s MORE ! Those are the hard costs. There are soft costs as well … As you found out when you researched financing … Closing Costs and Interest Expense are substantial in Private Equity Lending … based on market & transaction risks.

Soft Costs So, between 10% - 15% in soft costs Baseline Loan & Closing Costs: Points (1 Point is 1% of the loan amount) About 5% (of the loan amount) For Title, Transfer Tax, State Stamps & Lender Fees (not including advance interest) Property Taxes & Insurance

These Are Simply … Part of Your Cost Analysis Many Private Equity Lenders will allow you to add Points and/or Closing to the Acquisition Cost … just like a countertop or carpet.

Analyze, Measure Twice, Cut Once … If so, Re-Run your LTV / ARV numbers to see where you are. As many Lender’s as there are in this room … there are 2 x’s that # of options to structure a Private Equity Loan transaction. Use your BWI Resources

Review Baseline: 1.80% of Acquisition or 65% of ARV 2.Calculate your hard & soft costs accurately, be conservative. 3.Talk to your lender about your plan. 4.If you’re not sure … JV with a BWI partner or coach and feel GREAT about it! Hit all Four, You’re in the door !

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