Fix and Flip Funding Mastery: Inside Institutional Underwriting and Risk Management

0:00You're listening to the Investor Agent Nation podcast, empowering agents and investors to collaborate effectively and grow their businesses symbiotically. Your host, Randy Zimnock and Eric Gross, share real-life case studies, trending tactics, and expert strategies that have helped them to accomplish over $1 billion in sales volume. Whether you're a seasoned agent looking to expand your business or an investor seeking to optimize your returns, you're in the right place. This is the Investor Agent Nation podcast. Hi. Some of you don't. Some of you don't, but I open up a funding division and by partnering with Optimus Capital actually, now I guess it's going to be seven months or so, maybe six months somewhere in there. So I've been personally mastering funding, learning a ton and doing a lot of loans now.

1:01So I'm taking a lot of that stuff that I'm learning and packaging it and want to teach it because I don't see too many people going into the depth of what goes on behind a scenes of lending. And it was eye opening when I started to learn. I borrowed a lot of money personally over the years since I've done over 350 flips. Most of that was in San Diego County. I never really looked into the depth of what happens behind a scenes of the money we borrow. A lot of times we borrowed from institutional lenders. Then we transitioned to private lenders, which was obviously a lot easier. But nevertheless, we borrowed a ton of money over the years. So now it's kind of cool to be on the other side, right? To be able to help a lot of investors, a lot of seasoned investors, a lot of new investors helped them with funding and match a product that aligns with their goals and vision of whatever they're going after. So today we're going to go into the more details of fixed and flipped funding.

2:05Optimus Capital is the company that I partnered with. Since they are the big gorilla, I guess in the space, they've done over 681 loans in 2025 alone, which is impressive. That's a lot of loans, $312 million in sales volume of loans that they did in 2025. So I wanted to be connected with someone that obviously understands lending at a deep level and Optimus Capital gives me not only that, but also access to so many different capital partners across the country. So we cover most states, including we do some in-house lending as well with a few states and growing. So it's kind of cool because we have a mix of things that we can do. And it's to the point where a lot of the capital partners are, I want to say, I don't like to use the word bag. It's more of like they really want our business.

3:06So they are bringing their cheapest cost of money to us that we can then utilize with our investor clients that we work with. So it's kind of cool how they're fighting to be connected with us. So we can then get their funds, make them money because a lot of that money behind the scenes is institutional hedge funds, things of that private money. That's what's being traded kind of behind the scenes. And they're all about returns, but also with thought and they want volume. And that's what we bring to the table. If you are interested in in that, like getting a loan priced out or get a free approval funds, let me know. You can go to this website right here and I put that in the chat. So with that said, here's a few of the loans I funded in different states. There's many more. Oh, here's one from Robert.

4:08Robert is still on to easy street. This is Robert's property. We helped him fund. So thanks for trusting us, Robert. Appreciate it. And let's get into it. So fix and flip funding mastery. How institutional lenders underwrite your deal. So what we need from you to begin with, just to even start for someone like myself or a really any loan officer. And when I'm speaking, I want you to think not like, oh, this is what only we do, meaning myself and Optimus Capital. It really, it's more general. I would say most loan officers that deal in the investor space are going to require these type of things that I'm going to discuss today. So I want to kind of speak more from a general terms, not just specific to Optimus Capital. So first and foremost, of course, we need to address some lenders just don't do business

5:10in certain cities. For example, you know, Baltimore, a lot of lenders are very cautious and some just say no. Certain parts, some lenders don't want to do business in Philadelphia. Some lenders don't want to do business in Chicago. It is all about risk management for a lot of these institutional lenders behind the scenes. So of course, getting the address right out of gate is important. Do you have the property under contract? If you have it under contract, what is then anticipated closing date? I always say if you're starting out and you're new and we haven't done business together, then I would like to see if we can get three weeks of possible because I know it's going to probably take me a week just to get everything I need from you, the borough, right? To collect all the paperwork, it takes time. You'll be surprised that if you don't have it all organized and ready to go, how long it might take for you to find it, gather it, send it to me, and then I might be like, hey,

6:11you're missing this, you're missing that. So I would like to see three weeks if possible. And then once we have that on file, then we can do, you know, 10 days, two weeks, no problem, right? If under contract you still have any inspection contingencies or any other contingency in place left before your deposit goes hard, I always would like for you to have that. I think that's a pretty big, I would say I'm finding out a lot of investors that I have not done a lot of business yet. They email me and they're like, Randy, I got to deal locked up. You know, can you tell me tomorrow if I'm approved? I'm like, well, it doesn't necessarily work that way. I have to collect all the paperwork. We have to underwrite it. We got to get it appraised or evaluated internally. So we might not know until sometimes, you know, if it's a two week closing, we might not know five days prior to closing that everything is cleared from underwriting. So it's not that simple, right?

7:13Now I can provide the term sheet. I can provide pricing based on the preliminary information, but I don't know what we're going to find out with underwriting, learning the process that might potentially kick the loan back or the property back from being fundable. So it hasn't happened yet, however, it could. So I would never say, oh, it's guaranteed. It is not guaranteed. When you're borrowing money, nothing is guaranteed, right? Even from a private investor, someone will tell you, oh, yeah, I'm going to lend you money and then they change their mind three days before closing. It's not guaranteed. So I need to know and I would love for the investors to have some type of way of getting out of the deal for either because the property needs too much repairs or maybe the funding is not going to go through because of some red flags that we found out during underwriting. So I always recommend getting 10, 15 days if you can for inspections. Obviously, we need to purchase price.

8:13Is this a wholesale? If it's a wholesale, what is the assignment fee? And I'll get into the specifics of that later, why that's important. Of course, rehab amount, after repair value, loan amount requested based on your purchase price, like what are you realistic looking for? Are you looking for 80% of purchase, 90, 75, whatever. What is it that you're looking for? Maybe you have some liquid funds yourself. Do you want to finance the rehab costs? And are you planning on borrowing secondary financing for the down payment, closing costs and holding costs? A lot of the borrowers ideal with our newer, they don't have a lot of liquid accessible cash. So what they do is they borrow money from private sources for the gap. In this case, the gap would be 20% of the purchase price. Let's say if you're borrowing 80% from us or any other institutional lender, then the other 10, 20% has to come from somewhere. So that's called secondary financing, AKA gap funding.

9:16A lot of borrowers also borrow additional money on top of the down payment to cover their holding costs that they're going to have monthly. So if so, how much of your own money are you able to put into the deal? I also would like to know that because certain capital partners we work with, they have minimums where you have to put in 5% or 10% of your own money into the deal. Anything property specific, I would like to see if you can maybe send me a property card confirming unit count, square footage and room count. If you don't have access to that, let's say the MLS, then one website you can check out is called propwire.com. It's free. You can set up a free account and actually pull up a property card. You can find out how much, what kind of loan is on the property. In many cases, it tells you that interest rate on the current loan, that's on it. So maybe you can send me that information that will be helpful.

10:19I need the wholesale agreement if it's a wholesale. Also the original contract, the wholesaler signed with the seller. Make sure you get that and attach all the dendoms and counters. Any of your contracts, including the wholesale contract, mention the words a dendom and you do not providing them, then you're going to basically have me email you back like, hey, where is this a dendom? And if I miss it, what are the reasons and we go into underwriting, then they're going to find it. I mean, it's crazy how detailed oriented the underwriters are and the things they ask for. So the moment you have a contract and there, let's say you send a bunch of counters back and forth, I need to see all of those. I need to see the whole trail of those documents. So make sure when you're dealing with a lender that you send them the whole package. Otherwise, it's going to just delay things always.

11:21Please, please send me links to comps. Most I would say probably, most lenders are not going to probably do the depth of research that I do. And that's just naturally because I've flipped so many homes. So it's just naturally in me to think as it's my investment deal, and I analyze it as an actual investor personally. So I try to pick it apart for you and help you make a decision if this is a deal or not to begin with. But if you don't send me comps the correct way, it's really hard for me to do it. So please send me links to redfin or realtor.com or zilla, whatever it is. So I can just click on it, look at the photos if possible. I mean, ideally, if you can get into the MLS through one of your realtor's or if you're a realtor working with an investor, then I always, always prefer the MLS comps. So links to the MLS comps are always preferable.

12:21That's going to give me the most information, most data, and I always will be able to look at the photos where certain states like, like for example, in Florida, in Tampa, property cells automatically MLS removes the syndication of all photos to zilla as an example. So I can't go to zilla and look at the photos of the property that sold in Tampa. Now if I go to the MLS, they're still there, but they're not on zilla. And then certain states are non-disclosure states. So like Texas, I can go to zilla and look at comps because they will not disclose sold prices. So we need information from the realtor. We need the MLS comps. Ideally within six months and within of course one mile radius, similar neighborhoods, similar room, cow, and square footage. And an experience, experience is very important when it comes to pricing.

13:24So as I'm gathering everything else I mentioned, I also would like to know what is your experience. And some capital partners look at the last two years to determine if you're, let's say, a pro borrower, some will go back three years, some will just say how many deals you've done period, right? And say, okay, if you just done ex amount of deals in your career, then you're considered a pro borrower. And what I'm trying to get at is just to see if I can put you in a category of better pricing, right, with certain capital partners once I understand your experience. So I try to find out at least your last two, three years. And then based on that, I know which preferable capital partners I can go to where I can get you better pricing, right, based on your experience. And experience is an exit. So maybe let me clarify. Let's say one capital partner that we like to go to the most is one of our favorites,

14:24easiest to work with. They want to see two last two years of experience of exit. So how many properties did you buy and exit it in the last two years? And an exit could be a sale of a flip, right? Or you rehab rehab something and you held on to it as a rental. That's also an exit and it counts if you held on to it as a rental. So that's what we look at, not just flips. How not to send comps? This happens more often than I would like to admit, but many, many, many investors, including agents and it's so sad we'll send me things like this to support the RV. And to me, this is so hard. Like I can't, I can't gather much from looking at this, right? Besides like, okay, that's great. These properties look similar because of room count. Okay, that's great. But I don't even know anything about them.

15:26Like what do they look like inside? I have no idea. So I have to see the visual of the property. I got to see the photos. I would like to see the description. I want to get in and see everything so I can actually make an educated decision. Like, okay, what did that $598 mean? Or why did it want to $547? And the other one for $598, if they're similar square footage and room count, that doesn't make any sense. So I can't stand when someone sends me comps like this. And I will usually email you back and say, hey, please send me links to your comps. Period. If those are stayed, please talk to a realtor send me the MLS links because I can't help you with this, right? I can't give you my opinion. Or something like this, same thing. The one line spreadsheet of sold listings, pandings and actives. Like, okay, well, on the surface that, you know, might give me some information.

16:28But and I can look at maybe the per square foot. I don't really care. I don't look at the per square foot, to be honest. I want to see the property and I want to look at it from different angles. Like the other day, someone sent me a property in Oklahoma as an example. And their realtor send them three comps, right? And I go to Google and I look at their subject property. Okay. And I kind of absorb it. I look at the photos. I look at the lot. I go in the street view. I kind of look around what's, where am I? Where am I at, right? And then I look at the comps and then the first thing I notice with the first comp, it's literally right by the lake. I'm like, wait a minute. I don't think the subject was by the lake. And so I go back and I reconfer him, like sure enough. Nope. So then I am looking at this comp, similar in size as far as the house. But it's literally like walking distance to the lake.

17:29I'm like, I can't use this comp. And then I look at the next comp. I'm like, well, maybe the next comp is better. Well, the next comp is literally on the lake, like with the lake view. And I'm like, I can't use this comp for a property that's inland. And then when I actually zoomed in from our subject property closer, I realized that it's literally off the highway. Yeah. And the borrower said there is a wall they built. So you don't hear the noise. But it still is right by the highway. Right? So I wrote back. I'm like, I'm sorry, but I can't use any of the comps that you're realtor sent you. And I'm not going to take the time to look at comps. That's not my job. Like I can't be looking at comps, like searching for them. So I said, hey, please send me comps that are more in comparison to your subject. But something that I can actually look at. Now imagine if I only looked at those three or four comps in this view that you're seeing.

18:34And I just looked at it as a line item. It would be so misleading because I wouldn't be able to know that the two of the three comps are on the lake. That doesn't tell you that information. And crazy that agents and investors are looking at comps like this and make their decision on the ARV. By looking simply on something like this. And it blows my mind to this day. And so please, please, please, if you're listening, don't be one of those people. Please dig deeper. Look at what agents are sending you. If you are the agent, please do a better job sending better comps to your investor client so they can make a better education decision and they can get funding faster, right? Because I will absolutely push back on something like that and basically tell you go back to the drawing board and re-send me the right information. Because what you're sending me, I cannot approve right now.

19:34This is how I want the comps in the ideal world. And I come from a background of being a realtor too. So I have a team in San Diego and I work with a lot of investors. I operate in both arenas. I've helped a lot of investors sell houses as well. And if somebody in San Diego asks me to analyze a deal that I might potentially end up listing on the back end because they're about to buy it as a flip, I will send them a comp like this in agent view. So an MLS has a client view, right? And an agent view. The big differences is that the client view doesn't show who is the listing agent, the buyer's agent, doesn't have any of the realtor information that's on the bottom. It doesn't talk about concessions that we're given. And it doesn't show private remarks, the client view from the MLS.

20:37Now the agent view, which is what the agent's see, hence why it's called agent view, has everything that the agency's private remarks. Who the agents were? How much concessions were given or kind of loan was used to acquire this property, FHA, conventional cash. All of this information can give me more insights into the property, right? So I like, I want to see ideally the agent view if I can. And if you're working with a realtor that you have a good, just relationship with, they wouldn't, they're not going to mind sending you an agent view of the comps. Like you're not going to, all of the sudden, like, start working with the realtor that is listed on one of these comps. Like that's ridiculous if that agent thinks that. So why not provide your own client just more information so they can make a better decision

21:40if the property they're going after makes sense on paper when it comes to the ARV. Because what you'll find in private remarks, things like, you know, trust sale or a state sale, right, which then tells me like, oh, okay, so that's interesting. This property was in decent condition, but it was a trust sale. So there was some motivation as an example, right? But they're not going to put that in most cases in the public remarks. So then you would know that information, right? So there are things like that or maybe what you'll see in private remarks for renovated homes. Maybe you'll see a addition in the back was unpermitted. Very common in California, right? Yet that square footage they used that populates in Zillow includes that 500 square foot addition. So on a surface, you're looking at the comp, you're looking and saying, oh, wow, look at this. It's a 1700 square foot house, 32 and it's sold for X.

22:44And then I look at the actual agent view of that same thing. And I'm realizing that it's actually legally 1200 square feet. The other 500 is not permitted. Well, that's a red flag, right? Some cases the appraiser might appraise it as a 1200 square foot home now, right? So these are the things that you cannot identify in Zillow, right? So if you can, ideally, please talk to your agents, ask them for the agent view. And if you are the agent, get comfortable using agent view with your clients. And don't worry about someone just calling agents who cares. If they don't want to use you, they're not going to use you, right? So this would be the ideal way. Secondary, of course, Zillow, like I already mentioned, right? Send me the Zillow, Combs, and like, this is like, you know, again, this is what I do. So what I do for my clients, I, this is what my expectations are so high.

23:44But it's also very difficult when somebody sends me Combs. And I, yet to this day, I don't recall unless I talk them to do this. But since I started doing lending, no investor or their realtor has ever sent me a map of where the Combs are in relation to the subject ever. Not only been seven months, so that's not a long time. But I can probably guarantee you that I might not see one for many years. And it, it's crazy because again, I do this for my clients, right? If I'm working with an investor in San Diego, because Combs is one thing, but if they're not close enough to the subject, then what are they? Is that a really a good comp? And I, how can I even tell if I don't put him on the map myself? So here I am, I'm taking Combs that I get from some of the borrowers I want to borrow from us. And then I'm plugging them in myself and just see like, okay, how far has this come from the subject?

24:49And then I'm emailing them back like, hey, these look pretty far. You know, can we find something closer? Like maybe go back 12 months, but closer. And then we can adjust based on what we know the market did value wise. Like I rather see Combs closer them further away, even if they're further back in time. Right? But I don't get the map view from the borrowers or their realtor's. I haven't to this day still, right? But if you can, please, which everyone can, right? It's just time by everybody's, you know, things like, oh, let's just keep pushing this over to the next person. Let them analyze it for me. But it's your property. If you're the borrower, if you're the investor that's going to about to spend X amount of money, some of your own money and buy this deal, wouldn't you want to dig deeper and look at it, even if your realtor didn't do it for you? Why aren't you doing it? Are you relying on your lender to do that?

25:51That's crazy. Like, yeah, we can lend you the money and we're going to be in first position, which we should be okay, even if your deal goes south, but you're not going to be okay as the actual investor. So you need to spend more time analyzing your own deals and sending me that full package correctly, right? So I can make a faster decision if this is a deal that we want to get involved with and land on, right? All right, enough of complaining. But it's true, man, it happens every day. Every day I get those emails and I just cringe. So fix and flip. What to expect when it comes to terms, right? If you're going to stand there, flip loans, you're going to see 80 hundred programs, 90 hundred and what that really means. It's 80% of purchase, 100% of rehab or 90% of purchase, 100% of rehab, right?

26:51Pretty typical, not a problem. If all the things check out, it's in a good area. It's not rural, right? Those are the ones that are harder to finance. Or if the rehab budget is higher than the purchase price, I just got one today emailed to me to price out. You know, and I think the purchase price is like 80 grand rehab is 160,000. That's a tough one. That's what we call a lopsided loan, right? Those are tough to find lenders on not impossible, but those are not favred, the most favorite of capital partners, because they see it as a more riskier. So can we do it? Yes, more risk, more scrutiny when it comes to rural and lopsided type loans. But everything that's pretty typical. And also, you know, usually minimums are around 100,000, which I'll get into in a moment, but commonly avoided areas by lenders.

27:57So I kind of touched on a very rural or low population cities, high crime, urban pockets, like I mentioned earlier, Baltimore, Detroit, parts of Chicago, parts of Philly are basically blacklisted on many, if not most of our capital partners. So they're not easy. So when you are in those cities, you really, really have to find somebody like hyper local. That is very, very comfortable in lending in that area. That's the solution, not that there is no people funding, but those people are going to be hyper local and they are comfortable because they're hyper local, right? So if they, if one of those properties go south for the investor, a K borrower, they can jump in, take over the property if they have to foreclose on it and they're okay because they're local. They're not scared, right? From that. So that's the solution there. Markets with very low property values are also commonly avoided.

28:57So if you have a sub 75,000 ARV, most lenders are not going to bother it because there's just no money in it, right? So it's not worth the risk for such a low price point. So you're usually your best option in those type of markets is private money. So that's what you should lean on if you're in that type of a market. Most have minimal loan amounts of 100,000, which I started mentioning. So and that could be collectively where I have one right now that I approved. That was I think like 60,000, 70 purchase, 60 we have collectively. We're able to 90% of the purchase on that one plus the rehab and that put us over 100 with our favorite capital partners. So we got the green light on that one, right? So it's a collective in most cases loan amount. Some capital partners, they want to purchase.

30:00Purchased loan by itself, be over 100,000 outside of the rehab money. They're going to lend you in in the escrow account that you're going to draw from. So it varies on who we deal with. Co-store disaster prone areas that's going to be case by case. And if they do lend, which most will still but they will restrict or or pricing will be higher. And what I mean by restrict, they'll just say, hey, instead of LTV being 80 or 90% of purchase, we're only going to do 75 of purchase price on the loan. So they'll just lower their leverage, which then minimizes their risk. Right. So that's more typical in the coastal and disaster prone areas, because there are many like California. Many parts of Florida, right? Those are considered disaster prone areas. And we still lend there a lot, right? But there's could be some adjustments.

31:01Like I said. Two types of appraisals that you might expect when dealing with flip loans. Many, many capital partners do desktop appraisals. So some cases it costs you $0. Some maybe up to $500. But usually the way those work is the borrowers of its photos of the property via app. So you will get a link to an app. And you have to actually go on site to the property, because it tracks your geolocation. I guess, you know, by like satellite or whatever, you know. To make sure you're at the actual property. So you can't scan the system and upload some photos of a different property. Right. So you got to actually submit the photos from the location of the property live. And then there then does the desktop appraisal based on the photos they receive.

32:02And then they also look at the scope of work and all that. They make their evaluation and come back with their value. Physical appraisal self explanatory, right? That's in person appraisal meets you there borrow pays for appraisal with the third party company. That the lenders work with usually their AMCs. Those are basically appraisal management companies. Many of them go through because then they submitted to them. They will put the appraisal on the panel and then they bid on it. The appraisers and then whoever wins the bid gets the assignment. And then that's who you end up meeting at the property, right? Those will vary by state and cost, you know, could be from 500 to even 900, right? Depending where you are. I have it's pretty common for. It's more common in the DSCR. Lone space where if someone hasn't done loans in a while and they've like held on to their rentals for a long time and they come to me.

33:09They want to refinance and cash out or whatever. It's like a shock when they get the invoice for the appraisal and it's like. 700 bucks for a single family phone. They're like, what the heck? Unfortunately, that's the market cost now, you know, because we have to go through AMCs. I said appraisal management companies. They take an override, right, for managing they'll probably make two 300 of the top. The appraiser will make the other 400. And those type of loans that we order for the SER are value home value of the property. And also the rental market projections or market value as well. So they are technically doing two reports to so that's why those are a little bit more money. But it's pretty common that I have my borrowers that if they haven't done business in a while. They get sticker shock when they see those invoices to like, what is this?

34:12And I have to explain it. But on flip loans, it's a little bit cheaper because we don't do the rental market analysis, just the home value. The most common program that we have that, you know, most of the investors I work with, aka borrowers, will fit in. The 90 hundred program, 90% of purchase, 100% of rehab, the rehab money is put in an escrow account. And then you draw based on completion of the phases of your project. And then you receive that money and draws. Most lenders will have a maximum on loan to total total loan to value of 75%. And that means 75% of ARB of the after repair value. So in this case, I showed an example, if you have a purchase price of 300,000 rehab 70 ARB for 60, 90% of purchase price will be 270,000.

35:18And 270 plus the 70 for the rehab, that will equal 340,000 for a total loan amount that we are agreeing to lend to you potentially. However, before we say yes, we also have to take that 340 and divide it into 460, assuming that our evaluation comes back at 460. If it comes back at 460 and we divide the 340 into 460, if it's at 75% or under, we're good. However, if the ARB comes in lower for whatever reason and we divide the 340 into that lower ARB number and we cross over the 75% into 76, 77%, well, not necessarily that your loan gets denied, you'll just receive less money on the purchase. So instead of getting 90%, you might receive 85% on the purchase.

36:22So we can lower the total loan amount and meet the threshold of the 75% ARB. So think about it like almost like a guardrail, right, that we have to follow. Some capital partners will also have another layer of a guardrail and it's called loan to cost. And what that calculation looks like is everything I mentioned above, if we use the same example, we calculate the loan to total cost by taking 300,000 plus the 70, that's the total cost to you, the investor slash borrower. And then if we were to lend the 90% we take the 90% of 370 your total cost that equals 333. So some capital partners will say the most we can give you on this loan regardless of everything else checks out if the ARB is 75% or under LTV.

37:30But if the 90% rule is not doesn't work here, then we have to lower your loan amount. And if we did that in this example, we actually are short 7,000, meaning 90% of 370, which is the loan to cost, right, which many capital partners have it at 90%, some have it even lower. Well, this in this example comes in at 333,000, but if you remember from the example, you were asking me for a loan of 340, 90% of purchase plus 70,000 of rehab, that's 340, well, that's too much by 7 grand. In this case, with this particular capital partner that has this additional guard, guardrail of LTC at 90%. So required as additional down payment or lower the rehab budget by 7K, those are our options. So can the rehab budget be shaped by 7K or if not, then you're going to have to bring a higher down payment period, right, because we can't go above 333 on this particular example.

38:42So it's just good to know. So that way when you're running your own numbers, right, you can start maybe checking against some of these guardrails and see knowing that most lenders, that's what they use, right. So another thing you're going to be asked for is a rehab budget or, you know, scope of work, right. Some capital partners have their own templates that they will, you know, email will email you to fill out. This is an example of one, right. And I usually try to help you review this because we do know what they look at and what they might potentially kick this back to us for to correct change or add. So I really try to take my time reviewing your scope of work and see if there's any edits that we need to do. So it doesn't get kick back basically because every kick back, which really is called a condition, right.

39:49It just delays the process. That's it. So the less times we get conditioned for something, the faster the loan moves, right. So the more I can package things correctly and clean it up for you on a front end, the easier it is to get through on the right and get to the closing table, right. And this is a big, big step in the process. The scope of work understandably. I mean, that's, you know, that's the type of loan it is. So they're going to pick this apart. Make sure, especially if you're a new investor, they'll definitely scrutinize even more just to make sure like, oh my goodness, like why are they saying, you know, too grand for a brand new kitchen. It's like, what does it make any sense, right. So like numbers have to be realistic. They're going to look at it. Right. And if I find something like that, I'll ask you, like, hey, this seems off. You don't have enough money for this or many times they'll say, hey, I'm going to ask you. Many times they'll say, hey, I, we've noticed they didn't put a line item for permits, but they're adding a bathroom inside the house, a third bathroom. Like, how is that happening. Right. So then we have to explain that and then get a permit or sometimes they'll ask for a GC that has to be required.

41:11Many cases, not a problem in most states, no GCs required. You can subcontract and run it as the owner, owner operator. But if it's a bigger budget, you might be asked to provide a GC license and name. I find that they don't necessarily on the right is don't call the GC. They just want to know you're going to be working with one. And then later, if you change your mind as far as who you're going to work with, not a big deal. Right. Doesn't mean you are committed to that GC that you're going to put on the scope of work. Right. So that's a little tip for you. So I think I covered some of these actually so too low of a repair number. So those are some of the red flags they look for permitting. We talked about GC required. We mentioned that they might ask for proof of insurance, additionally insured, definitely. I've had one where they asked for proof of experience, even one capital partner for this specific area actually in Chicago area.

42:19Again, that area very few capital partners and they scrutinize everything foundation work, bid from a foundation contractor. They might ask for it if they see that on the scope mold inspection. I actually had one recently where they got the photos back from the bar where through the app and you know it they realize it's a hoarder house. Like it's like impossible to walk through. So they actually required a mold inspection to be done. And the bar or had to pay for it. Right. Because they're like, well, we don't know what's underneath. We can't see anything like this is a risk. This could be a hazard. So they required a mold inspection. You know, knock on wood. Nothing happened. And that one, everything came back clean. But it could happen. So there's just little things like that that can that can come that you're like, oh, wow, where did that come from? And then draws. So as you get through these phases, in most with most capital partners, there's no limit on how many times you can do a draw, right, to recoup the money you've spent on certain phases.

43:29They all will want proof, of course. Right. Some will be with you going to the property again using the app, taking the photos of the updates. Some will send out someone physically to the property to inspect it. Right. Cost usually between 150 to 250. I think I might have seen one at 300, but most common is between 150 to 250 per draw. So you probably don't want to do, you know, 10 draws. Right. Cause it will add up. So I think the most common number I've seen is 3, 4, 5 max, I would see in most projects. Right. But that's kind of typical. Potential surprises. Reserves requirements, some capital partners, they might require six months of interest, only payments, closing costs and down payment, they might they will they might require for you to provide that as the borrower before closing.

44:37One of our best capital partners that we like to work with, they don't have a reserve requirement of any kind, even for new investors, which is awesome. They also allow secondary financing, which many of them don't. But I would say many capital partners will require liquidity of some sort and usually it's the six months period. Because you're going to be making interest payments on that loan, they're going to lend you in first position. So they want to know where is that going to come from. Right. ARV coming in lower. When that happens, which it has happened for me, loan amount is then based off the lower ARV calculation. That's really what you need to expect is just you're going to have to bring more money to the table. You know, you're not necessarily, you know, the loan doesn't have to get denied. You'll just have to bring more money to the table, but that could be a good opportunity for you to be like, oh crap, why are they, how did they come back with this number.

45:44And you might in most cases, you might get access to that report and review it as the investor and be like, oh man, maybe I was off. Maybe we did, we didn't look at it correctly. And maybe I don't want to buy this deal after all, right. So in some cases, I had one situation like that so far, where I had a client basically back out because they agreed with the lower ARV and they didn't want to buy it because they're the margins were so thin for them to begin with on the profit side. So it helps and gives you another perspective. Again, worst case, usually loan amount is just then lowered declining markets like Florida, different pockets of Florida are going to get more scrutinized like Naples, Cape Coral area as you some of you might have heard in the news, right, being like the epicenter of the downturn. Well, guess what, I like many capital partners are going to be careful and not that they will not lend at all some will say, no, we're not lending there, but most will just reduce their LT their leverage, right, to 800 or even 7500.

47:00And then they might reduce the total loan to 70 of ARV or even 65 of ARV versus the typical 75, right. So that's usually what happens, they just adjust their leverage position. Maximum 15% of the purchase price for assignment fee allowed towards calculating the loan amount. So what does that mean? If you have an original contract price of 75,000 and assignment fees 25,000, your total purchase cost is 100,000, right. Well 75 15% of 75,000 is 11,000 to 50. So total use for loan calculation would be 75,000 plus 11,000 to 50, 86 to 50 would be the total. Why? Because this particular capital partner says, hey, we don't want the wholesale fee, the assignment fee to be more than 15% of purchase price.

48:07And I actually have this happen in a loan in Illinois where the assignment fee was more than 15% and the investor had to just bring more money to the table, right, for the down payment. They did not allow for the total loan to be based of 75 plus 25, which would make it 100, they based alone of 75 plus 11 to 50, which in this case was 86 to 50, that was their total purchase price that they were willing to use to calculate their loan amounts. Right. So that's how that impacts you. Not all have that, but don't be surprised if someone comes to you and says, oh, by the way, you got to bring more money to the table because the guy you're buying it from is making 40,000 dollar assignment fee and that's 20,000, that's 20% of the contract price. We're not okay with that. Right.

49:08Secondary financing, it's either not allowed at all or in other cases, if it's allowed, they will many capital partners will start charging you interest on the money that they will be holding for your rehab. That's called Dutch interest. So what does that mean specifically, I guess would be is, when you're making your, you know, you buy the property and you borrow 90% of purchase price, you're going to have a monthly payment of interest single every single month. Well, down that monthly payment is actually going to be higher because if you have 50,000 allocated on a side for your rehab, they will add the interest on that 50,000 as it's as if it's already in use. So your monthly payment is going to be based on the total amount of your purchase loan and the rehab loan combined and interest is calculated on the full amount called Dutch interest from day one, mainly because you have secondary financing, aka gap funding.

50:19If you don't have secondary financing, most capital partners will not do Dutch interest, it will just be interest as drawn or non Dutch, right, which means you only pay interest on the money that's in the escrow count they're holding for your rehab and repairs, you only pay interest when you draw. So if you draw 10,000 and your interest rate is 12%, well, then now your monthly payment goes up by that amount of interest for that next month, right, that's called non Dutch or interest as drawn. So those are some of the surprises and a couple things just good to know, tried to lock in a 12 month term, six months goes by quick, when you're rehabbing a property and you have to sell it.

51:20I find most capital partners are in a 12 month term basis, some still do six, but I can tell you if you ask them if they can at least extend it to nine, most will do it for no additional fee. Right. So if you see six, try to get at least nine, okay, if you see 12, great, why? Because if you have to extend your loan, usually you'll have to pay a 1% penalty for a 3 month extension. And if you're in a state like California and you're borrowing $800,000, 1% is a lot of money. Maybe not a big deal if you're in Oklahoma and buying a house for 100,000, right, but if you're in those other states that can add up, most lenders will use the higher credit score to qualify borrowers when there are two or more members part of the LLC.

52:21So just good for you to know. And I did a whole thing on credit in the previous training about kind of how to be fun, the ball, when I interviewed the VP of Optimus capital. I want to see more of that. It's on YouTube on the investor agent nation channel. We kind of go into more of the specifics of costs and all that and credit score and how it plays into things. But create a new LC is this is an option to consider create a new LC with your joint venture partner and we can use their credit score to qualify you for better pricing. So if you're planning on partnering with someone, maybe one of your friends is bringing in the money and you found the lead and you're like, hey, let's do this together. Let's be partners, right. You might want to consider just joining creating an LLC together because maybe that partner has better credit and then we can qualify you for that loan and better terms based off that partner's credit. So we have that happened before and then 70 day, 10 day, they closings are possible. However, bar or documentation submission delays make it impossible and hence to what I said on the beginning.

53:35I mean, it usually takes me almost up to a week to just get all the documents. It's rare where the borrower gets me everything exactly how I need it within couple days. It's rare. We're usually going back on forth making edits asking for exhibits, eventums, changing the scope of work and it's like, next thing, you know, oh my God, we just went through a week, right. So just FYI once you do one or two with the capital partner and you get used to it, then it can go much faster and we can make magic happen. So it just gets easier when working with the same lender as well. So if you keep bouncing around different lenders. Just know it's it's like starting from scratch, right. That it will you'll have to go through the same process again. They don't know you that don't have your paperwork on file. So it just will delay stuff again. So the more you can do with one lender, the better the faster the better rates you will get over time.

54:35So...