FAQS

Frequently Asked Questions

These FAQs and answers are not intended to be exhaustive, nor do they create any relationship or duty on our part to assist or lend to you.

This information is intended to be helpful and to assist you in determining if a hard money loan is a good fit for you. If we haven't answered your question here,

We encourage you to Contact Us to discuss your specific question or need.

These FAQs and answers are not intended to be exhaustive, nor do they create any relationship or duty on our part to assist or lend to you.

This information is intended to be helpful and to assist you in determining if a hard money loan is a good fit for you. If we haven't answered your question here,

We encourage you to Contact Us to discuss your specific question or need.

Investing in Our Notes

What is an "Accredited Investor?"

● An accredited investor is someone who possesses over one million dollars of net worth, excluding their primary residence;

● Or, if they are married, they and their spouse cumulatively make $300,000+ each year for the past 2 years;

● Or, if single, they have made $200,000+ each year for the past 2 years.

Commercial/New Construction

In your opinion, What are the "No-No's" of real estate investing?

I wouldn't say there are "no-no's" to commercial real estate investing. I have seen people make money on deals I would never touch, and I have lost money on deals I thought were slam dunks. It's really about finding out what your risk tolerance threshold is and not going beyond it. When you lose your discipline in the market, you lose your shirt.

What is a rehab scope of work?

A scope of work (rehab budget) is an essential document that lists everything to be completed on a rehab property in careful detail. One might even think of a scope of work as a "house/project flipping checklist" that helps the investor communicate to the appraiser and contractors exactly what needs to be done, how it needs to be done, and how much money in the budget is allocated to each item.

Before Starting Your Project

10 Things To Do First

Pull comparables from the MLS and other websites that are within 1-3 miles of your property: No rehab project can start without a proper vision of the final product. Research your market area using the MLS or websites that pull from it (like Zillow and Redfin) to find similar properties. Pay attention to the number of rooms and types of features offered in comparables, as well as the listing price. Not only will this help you gather inspiration for your rehab, but it will also help ensure the finished property is in line with similar properties—a crucial factor for selling the home quickly, and for your asking price.
Find a contractor and invite them to the property for a walkthrough: To dial in a timeline and budget for your property, have your contractor walk through the property with you and share your plans and ideas. Better yet, have a few contractors walkthrough so you can ensure you select the right person for the job. Be sure to share your expectations for the project, note of your ideal timeline, and don’t be afraid to ask questions. The right contractor will help your project run smoothly from start to finish.
Bring essential tools like a camera and flashlight: Don’t show up to your walkthrough empty-handed. Investors should always bring a camera, flashlight, calculator, and a notepad to any property walkthrough. Take pictures as you look around, so you can reference certain rooms and areas later. Write down any potential concerns you have, as well as extra projects you would like to see completed. The more thorough you are now, the more prepared you will be in the future when the project actually kicks off.
Review the exterior, paying careful attention to structural issues: Walk the perimeter of the house more than once. Keep an eye out for any cracks or issues with the foundation, as well as any exterior issues that may be present. Check the status of any fences, decks or outdoor areas as well, as these will factor into the curb appeal later on. This step will help make sure all any big problems are out in the open before you start.
Check interior walls for layout and cosmetic changes: You’ve heard it before, and you’ll hear it again: today’s buyers are looking for an open floor plan. If your property has a boxy layout or unnecessary rooms, look for opportunities to open the space up. Is there a wall between the kitchen and living room? What about any awkwardly placed closets? Be sure to consult your contractor on which walls are load-bearing. This will help guide what you can do with the property’s interior.
Decide what type of flooring will suit the property: As you survey the interior, take note of the condition of the flooring. What materials are used throughout the house: tile, laminate, hardwood, or carpet? Refer back to the comparable properties you found earlier, and get an idea of what potential buyers in the area might expect. Then, price out options that will look right with what you plan to do to the space.
Survey kitchen and bathroom fixtures: Buyers will go straight for kitchens and bathrooms when touring a new property, making these crucial areas of your home. However, they can be highly expensive to renovate. To make sure your property delivers without breaking your bank, take note of any existing features that could be repurposed to fit your final look. Check the condition of any cabinetry, counters, and appliances to see what should stay. In some cases, a fresh paint job and new hardware will be enough to revamp a kitchen or bathroom, while other properties may require more significant upgrades.
Review the condition of the electrical, plumbing, and HVAC systems: Work with a professional as you survey the quality of the electrical, plumbing, and HVAC systems. Then, decide which areas need to be replaced, upgraded, or simply cleaned up. This is a crucial selling point, so don’t try and cut any corners as you finish up your rehab project.
Examine interior doors and trimming: Don’t skip over the details! Double-check the doors, trim, and hardware throughout your property for any last-minute changes. The doors should all be the same style and color, and the trim should flow when moving from room to room. Assess the condition of all the doors to make sure you don’t leave anything out.
Stage the property and get ready to sell: We HIGHLY recommend this step. Staging allows your buyer to see the vision. The most important factor when showing your property is creating a space that potential buyers can picture themselves living in. Hire a staging company or set up the property yourself (if you think you can) and create an atmosphere that feels like “home” to anyone that walks through the doors. You may not need to stage every room of the property, but key areas should be prepared for potential buyers with care.

The best way to succeed as a real estate rehabber is to do your due diligence before getting started in any deal. Estimating the repairs for a given property takes experience and expertise.

Draw Request

Will you accept a change in scope rather than an upgrade? Ex. Salvage cabinets rather than replace and use those

funds to replace a roof.

You are more than welcome to use any unused funds from your repair list for other repairs that may be over the amount you budgeted for.

For my first draw request, is there an option on your website to submit my request?

Hover over the "Borrowers" tab in the top menu, then select "Request a Draw."

What happens to any remaining balance of funds should I not use them all?

We release the remainder of the rehab funds at the time of the final draw request. Property has to be 100% completed.

Am I able to float the entire rehab and then invoice for one lump sum at the end?

Absolutely!

In the event of a change order, are additional funds available as long as I don't exceed 70% LTV?

As you know, the repair list submitted was given to the appraiser to determine your ARV. The only additional funds that will be available are the ones you list on your repair list under Miscellaneous/Overage. You will be responsible for any overages unless you have unused funds from another repair on your list.

Fix and Flips

What is the most expensive thing that can go wrong with a house or rental property?

What is the 70% rule in house flipping?

The 70 rule in house flipping can be used to determine a maximum purchase price of a given property by accounting for repairs and closing costs. To calculate it, multiply the after repair value (ARV) by 70 percent and then subtract estimated repair costs.

Can you really flips houses with no money?

There's no standard formula to account for every expense you will incur on your flips. There are just too many moving parts and personal preferences involved and each of those can be as unpredictable as the last. No two properties are alike, and the cost of flipping will vary significantly from market to market, and property to property.

How much does it cost to flip a house?

Yes and no.

If you are willing to pursue creative financing options such as joint partnership agreements with someone that has money, forming an LLC with a partner with money, etc., then you wouldn't have to have the money yourself.

For our loans, we have to be able to see that you (or you and a partner) have enough funds to cover closing costs, builder's risk insurance, and at least 6 months of payments available to you in order to show that you can afford the loan.

In the event of a change order, are additional funds available as long as I don't exceed 70%?

Rentals

In real estate investing, is owning a rental property worth the headache?

If you are cash flowing, yes.

If you are in the deal for the appreciation and/or breaking even, no.

Rentals should not be a headache if you are using a good property manager, training your tenants from the start, using correct documents for leases, move-in checklists, and setting expectations.

"Mr. Landlord," Jeffrey Taylor, calls his tenants 'residents.' His website is full of great information and tips on how to change your mindset about being a landlord.

Is rental property investing the most efficient way to build wealth? Why or Why not?

I believe that buy and hold is the best mode of building wealth because it meets several money-saving and cash-building options.

First of all, you should cash flow. This means your mortgage payment is lower than 75% of the monthly rental income. Second, you can deduct expenses, saving on taxes. Third, you can depreciate the house and everything in it. Fourth, interest payments are still deductible as a business expense. Fifth and finally, the house should appreciate over time. That one is last because you should never buy a house based on appreciation--that is the cherry on top.

As a Landlord, besides reducing the rent, what are some interesting ways to encourage your tenants to renew

their lease?

Never reduce rent to keep a tenant. Upgrade the house to attract a tenant or to entice them to stay--that is a tax-deductible improvement. Rent should be increased every year like clockwork, even if it is just by $10.

How would you scale rental property portfolio quickly?

First…What I tell investors who have one or two rental properties and have primarily used their cash to fund the purchases, is that their money is the most expensive money they can use. When you tie up all or most of your capital into one or two deals you have effectively prevented yourself from securing any more deals.

If you have little or no cash on hand and an opportunity presents itself, you will need to borrow money to secure this new opportunity and most lenders will not lend to you with little or no liquid capital in your accounts.

Leverage is the name of the game when scaling just about anything. If you have capital locked up in one or a few assets you should look into refinancing them to open up liquidity to secure the ability to leverage those funds into the purchase of several more assets.

Example: You can buy one house with $100,000 or you can buy 5 houses with 20% down and leverage the other 80% from a lender. The debt owed is mitigated by the cash flow of the property, the depreciation you can claim on taxes, and the appreciation you earn tax-free as the market improves and the property values rise.

Secondly, meet as many wholesalers as you can and take care of them. They will bring you deals that no one else is seeing and you can get great rental properties this way. Also, don’t be afraid to buy a rental that needs more than paint and carpet – evaluate the work needed and the monthly lease differential between doing the work or not, a lot of times it's worth the work.

What is the most expensive thing that can go wrong with a rental property?

Purchasing a property without proper Title Insurance and/or Property Insurance; the potential for loss is theoretically unlimited if you do not secure your investment with proper insurance.

Our Loan Process

How does the program work?

We lend money in metropolitan areas within North and South Carolina, Georgia, Tennessee, Virginia and select areas of Florida, with a few exceptions, to people who buy single family residences (SFR’s), Multi-Family properties, 5 + Unit apartment complexes, Mixed-Use properties and Multi-Tenanted Commercial property. These investors then fix up the properties and sell them or refinance them to rent out. We work very hard to fund quickly so that you can demand large discounts from your sellers. Our program is great for people who can buy right, fix a property up quickly, and then get it re-sold or refinanced.

What are the costs?

We charge three to five points (3-5%) of the loan amount. These points are in addition to the other costs associated with any other loan closing such as attorney fees, processing fees, recording fees, etc. These fees typically run about $1850.00 plus the points.

This is, however, an estimate.

Other costs involved may include pro-rating of taxes, insurance, servicing fees and interim interest.

Although the term of a rehab loan is generally six to twelve (6-12) months, you may, at the Lender’s sole discretion, renew the loan for an additional 90 days for an additional renewal fee of two (2) points of the loan balance that is paid to the lender at the time of renewal. Most of the loans are paid off within 190 days.

How do you decide how much to lend?

We can loan up to 100% of seventy percent (70%) of the ARV on single family residences (SFR), 55%-65% for other type properties. We may, at our sole discretion, require 10% of the purchase price as a down payment. You cannot get cash out of a hard money rehab loan.

Where do you lend?

For single-family residence properties, we loan in NC, SC, GA, VA, TN, FL, and now TX. Nationwide, multi-family & commercial properties are considered on a case by case basis.

What do you look for when approving a loan?

Mostly, we look at days on market for the subject property very carefully.

Exceptions to that rule are sometimes made to those with A+ credit and money in the bank or borrowers with whom we have an ongoing relationship.

We also look at the investors basic background, as well as credit worthiness. Our current minimum acceptable score is 640, however, we want you to be honest about your credit challenges. HOW you handled--and hopefully overcame--those challenges is important to us, too!

Do I need to put any money down or have any money in the bank?

In some instances, no money down loans are available. We may, at our sole discretion, require 10% of the purchase price as a down payment. You are required to bring points and fees to closing and have reserves to satisfy the underwriters. You cannot get cash out of a hard money/private capital loan.

What paperwork do I need?

Fill out the online application. We will contact you within 2 business days to discuss your application and inform you of additional documentation that may be needed.

As a general rule we will need:

● Copy of SSN and Driver’s License/Passport

● Financial Documents: Last 2 years of tax returns, last three months bank statements and two most recent statements for any stock bonds, IRA, 401K, and annuities.

● LLC Documents: Articles of Organization, Operating Agreement, EIN/Tax ID Document, Certificate of Good Standing and completed W-9.

● Signed Disclosures that we provide: Closing Disclosure, Background Report Authorization, Borrower’s Rehab Loan Disclosure, Credit Report Authorization and Release, Draw Schedule Disclosure and Loan Fraud Disclosure

● Purchase or Assignment Contract

● Completed Repair List (we provide)

Do you lend on rural property?

As a general rule, no, but we look at each deal on a case-by-case basis. We prefer that properties we loan on be within a county or city with a population of at least 300,000 people. Exceptions sometimes made for those with A+ credit.

Do you pull my credit for each loan?

Yes. We pull complete background checks, including credit, on all borrowers. This helps us to determine that you will still be able to qualify for the permanent financing when it comes time to refinance. Our goal is to make sure that you are able to refinance out of the hard money rehab/private capital loan as soon as possible.

Do you pull my credit for each loan?

Our approval is based upon your past credit history, credit score, funds available, credit card(s), available balance, and the value of the property you want financed. We look at the total overall potential of the Investor. Carolina Capital Management, LLC requires its investors to have an “A” or “B” credit grade, generally 640 or higher.

We look at your credit and background to get a feel for the person or persons who are borrowing the money in order to screen for borrowers who never intend to repay or may have issues with following rules and directions.

We look for ways to finance your investment, not for ways to turn you down.

How long does it take to get approved for a loan?

Within 2-3 business days after you have submitted your loan application and documentation, we can usually make a decision or give you a general idea if we can help you.

Remember, each loan is unique. Some loans can easily be closed in 10 days while others may take three weeks or more.

How long does it take to close the loan once I have been approved?

There are many factors which prevent us from making any guarantees as to if/when a loan will close. If you have already been pre-approved, it normally takes around seven business days once you find a property and submit the property information to us. Sometimes it takes a little more or less. We have closed in as few as two (2) days.

Many times it all depends on how long it takes to collect your loan documents, have a title search completed, get the appraisal and schedule a closing. There are other factors that can also delay a closing.

Always allow yourself plenty of time when writing your contract.

Should I have a property under contract before I fill out the loan application?

Carolina Capital Management, LLC can pre-approve you for our loan program prior to finding the right investment property.

Our process is two-fold.

We approve the applicant and we approve the investment property you are interested in financing.

We recommend that you get pre-approved so once you find a property to purchase, we can close faster.

What is the term of the loan?

We write 6- 12 month interest only loans. We charge three to five (3-5) points at closing and an additional two (2) points renewal fee is paid to the lender for one ninety (90) day extension period (at Lender’s sole discretion).

The average life of a hard money rehab loan is 190 days. The purpose of a hard money rehab loan is to either turn the property quickly or have it rehabbed and refinanced with a conventional lender.

Carolina Hard Money does not have any pre-payment penalties; you may pre-pay the loan any time you wish prior to the term of the loan.

How do I get refinanced to pay off hard money rehab loan?

If you are purchasing a property to rehab and rent, you can begin processing your refinance loan as soon as the repairs are complete and the final inspection has been made. You may also seek alternate sources to refinance and pay off your rehab loan if you wish.

Don’t forget that we can also transition your rehab loan to a long-term rental loan. Ask us how!

What is the interest rate charged?

The current interest rate is between 10.99%-13.75%.

*Subject to change without notice.

Can I get a loan to purchase the property and rehab it?

Yes! We will fund the purchase and all your repairs up to seventy percent (70%) Loan to Value (LTV), if you and the property qualify.

We do require you to complete a detailed, itemized repair list of the repair work. A draw schedule identifies the number and amount of each draw.

After a certain percentage of the repairs have been completed and verified, the monies are forwarded to you.

How many investment properties can I finance at one time?

We will start with one property until we have established a business relationship with you. As you become more experienced and have successfully completed a few loans with us, we can look at funding up to 2 properties as they are identified.

Will I need to get an appraisal?

Carolina Capital Management, LLC will order an appraisal from a qualified appraiser of their choosing who is familiar with evaluating investment properties. The appraiser will determine an “after repaired value” (ARV) based on the list of repairs that you and/or your contractor will be completing.

The cost of the appraisal is usually between $475-$600. Commercial or multiple units could be substantially higher.

Rush fees may be incurred for appraisals needed in less than 5-7 business days.

How does the draw procedure work?

You may have as many as five (5) draws as described in the “Rehab Loan Draw Schedule” over the life of the loan.

Each draw request will require an inspection to ensure that the work is completed in a thorough and professional manner.

After completing a certain percentage of the required work, you will fill out a “Draw Request Form” online. We will schedule an inspector to visit your property and authorize release of your funds.

Your payments must be current in order to draw funds.

The inspector is one approved by Carolina Capital Management, LLC. There will be a $150 inspection fee charged for each draw, which is deducted from the total draw amount.

If you request a draw and the work requested for reimbursement is not complete, you will be charged for the initial inspection and for the re-inspection, if you request one.

Upon completion of the complete project, you (and the contractor if there is one) will sign a completion certificate verifying all work is complete and code violations, if any, have been satisfied. Draws will not be released on or after the first payment is due and not received.

How much will my payments be?

Your loan is an interest-only loan. To figure your monthly payment, simply multiply the interest rate by the dollar amount of your loan. Since the interest is computed on an annual basis, you divide by 12 (months) to get your monthly payment.

Will you finance commercial properties?

Will you finance apartment buildings?

Do you allow interest to be deferred to the end of the loan?

Do you require a survey?

Do you lend on properties in a flood zone?

Will you lend money in my corporate. LLC, or Trust name?

Do you make loans on rental property?

Yes, we do loans on rental property. If the property needs to be rehabbed prior to being rentable you would obtain a hard money loan from us first. Once the rehab is completed, you could then be transitioned into another long term loan if you and the property meet certain criteria. If you and/or the property doesn’t meet the criteria, you will need to have the property refinanced.

What type of insurance do I need in the property?

Before closing you will need to have a Builder's Risk policy in place that covers both the loan amount, as well as, the term of the loan. The policy will need to renewable.

Properties located in areas subject to flooding will require flood insurance prior to closing.

For commercial, multi-family, rental loans etc., a different type or level of coverage may be required.

Do you also make traditional loans to investors?

No. You must get approved for the refinance with a traditional lender.

Do I need to be an experienced rehabber to qualify?

The majority of our borrowers are experienced in real estate investing and rehabbing. Investors with limited experience can still qualify on a case-by-case basis.

How much money will I need to have to get a loan with you?

For our loans, we have to be able to see that you (or you and a partner) have enough funds to cover closing costs, builder’s risk insurance and at least 6 months of payments available to you in order to show that you can afford the loan.

Do you broker business? I have clients that need to be refinanced.

Yes, we broker loans. We pay 1% to the broker and the client is yours no matter how many loans they do through us.

Will you accept a change in scope rather than an upgrade?

You are more than welcome to use any unused funds from your repair list for other repairs that may be over the amount you budgeted for.

What happens to any remaining balance of funds should I not use them all?

We release the remainder of the rehab funds at the time of the final draw request. Property has to be 100% completed.

How much will my payments be?

Absolutely!

How much will my payments be?

As you know, the repair list submitted was given to the appraiser to determine your ARV. The only additional funds that will be available are the ones you list on your repair list under Miscellaneous/ Overage. You will be responsible for any overages unless you have unused funds from another repair on your list.

Carolina Capital Management is a hard money lender serving the needs of the Real Estate Investor and the Small Builder borrower who is striving to build wealth and generate income for themselves and their families. We offer hard money rehab loans and Ground-Up Construction Loans for investors in NC, SC, GA, VA, TN, FL and now TX.

Carolina Capital Management is a hard money lender serving the needs of the real estate investor and the small builder borrower who is striving to build wealth and generate income for themselves and their families. We offer hard money rehab loans and ground-up construction loans for investors only in NC, SC, GA, VA, TN, and FL.

We also serve as consultants for investors, guiding them to network with other investors and educating them in locating and structuring transactions.

About Us

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Residential Fix& Flip