Permitting Problems and Finding Hard Money Lenders

Ashley Kehr:
This is Real Estate Rookie episode 162.
My name is Ashley Kehr, and I am here with my co-host Tony Robinson.

Tony Robinson:
And welcome to The Real Estate Rookie podcast, where every week, twice a week, me and my wonderful co-host Ashley Kehr, talk all things real estate. But with the focus on the guys and girls at the beginning of their investing journey. We want to bring you the inspiration, the information that you need to get started as a real estate investor. So Ashley Kehr, before we get started, let’s just say that this has been like one of the most technically difficult podcasts to record. Ashley and I have tried recording this like five times, but our system keeps crashing. So we’re hoping that we can get through in one piece.

Ashley Kehr:
Yeah. And we really haven’t even gotten past … this is the farthest we’ve made it, so far right here into the podcast.

Tony Robinson:
Oh, yeah. We’ve said this intro five times.

Ashley Kehr:
Yeah.

Tony Robinson:
So hopefully it sounds super polished by now. But Ash, what’s new with you? Give me like the quick rundown before the system explodes on us.

Ashley Kehr:
Yeah. Well, Tony, first of all, I got to say happy belated birthday. Tell everyone-

Tony Robinson:
Oh, thank you, Ash.

Ashley Kehr:
About your birthday in case they’re not following you on Instagram and gets to see all the wonderful things Sarah does for you.

Tony Robinson:
Yeah. So I’m training for a fitness competition, which is about five weeks away. And this last weekend was my birthday, but it was also my last cheat meal weekend. Instead of having the usual birthday thing where people bring gifts, I just had like a big cheat meal party. And I asked all my friends and family to bring me all my favorite junk food. So I had like one of the most epic cheat meals ever with every possible dessert and junk food you could think of. And then my wife being the amazing person she is, she did some really cool things for me. But she ended up renting like a slingshot, those little like three wheeled motorcycle go-kart things. And we got drive that around for the weekend, too. So, it was all around, just like one of the best birthdays, for sure.

Ashley Kehr:
Yeah. Just the way she decorated your kitchen with a picture of your face and pizza. But I have to tell you, so my business partner, Daryl that you’ve met, he did not think that you would cheat. He thought that you would not have any of that food. So, what were some of the things you ate?

Tony Robinson:
Yeah, I mean, I got so much stuff. But Ashley and Daryl sent me some Flemings, which is like a really nice steakhouse here in SoCal, so I got some of that delivered. I mean, I had shrimp scampi, I had fried shrimp, I had fried chicken, I had banana pudding, I had a bunch of Oreos, I had Reese’s Puffs, I had pizza from Domino’s, pizza from Pizza Hut, pizza from my father-in-law’s restaurant. The list just goes on and on and on, everything I could ever want, it was probably there.

Ashley Kehr:
Well, that’s awesome. That’s good to hear that you enjoyed yourself and then you got right back into the gym and right back into your routine the next day.

Tony Robinson:
Right back into … yeah.

Ashley Kehr:
One thing that we did want to send you was a catfish from when we into Paula Dean’s in Tennessee. The catfish that you love there.

Tony Robinson:
I love a good catfish. So if you ever want to surprise me with catfish, just know that you’re more than welcome to.

Ashley Kehr:
So today I went and looked at a property. It’s one that I’ve looked at several times and I’m just trying to figure out what to do with it and what the purpose would be. But I’m having trouble with the campground that I have under contract now. I talked to the county today and the RV sites that are there were never actually approved or permitted by the county, which obviously is a huge red flag.
So really what it was is the infrastructure there. So the owner added on 50 new pads to the RV park and he never got them approved from the county. And he never handed in his engineering plans to the county or the DEC, the Department of Environmental Conservation. So those are not approved at all. And if there are issues that we would have to dig up off of this, because there’s no plans for them, there’s nothing since this property is a foreclosure and we’re buying it directly from the bank. So after we’re done with this, my next call will probably be the DEC and see what’s going on on their side of things. Always exciting and eventful.

Tony Robinson:
Always something going on, but I want to dig into that a little bit, Ashley. So a couple questions. First is, how did you identify that those pads, those RV spots weren’t permitted? Was that something that they came up on your inspection report? When you went to go file paperwork to open title, did they say, “Hey, these plans don’t match the plans that are on record.” Like, how do you identify that something’s not permitted?

Ashley Kehr:
So you can talk to the county. This actually was the county, the code enforcement officer for like that town, that village. And he had called my attorney, actually. He received the application for … there’s a sewage treatment facility on the property and then there’s also nine wells. And he received the paperwork to transfer ownership into my company’s name. And before he accepted their application, he called my attorney and said, “I would really like to talk to the new buyer first.” And this was part of our due diligence to reach out to the county and just see what was going on, but he actually beat us to it. So, that kind of worked out great.
And so I did my phone call with him today, and he went over all of the issues that are on the county side with this property and would need to be remediated. And there’s a ton of revenue streams on this property and each of the different operations … so there’s a banquet facility, would need a permit. There is a restaurant, it would need a permit. The cabins would need a permit. The RV parks would need a permit. And he went over with me, what already had permits in place, what was missing and what would be my intended use with the property. So he just kept going on and on, it was so great. And I was very appreciative that he would just give this information to me.
And one thing he told me to do is to go to the county website and under departments go to the clerk’s office. And I would be able to submit a FOIL request where I would be able to come in and look at all of his documentation and reports, anything he had on that property. This is my first time ever doing due diligence on a huge commercial property like this. So it’s always great when you have people that are going to help you and kind of guide you too, in this learning process. So that’ll be another step that I do is, and then meet with him and go over all the documentation in his office, too.

Tony Robinson:
So can you close on this property without remedying the issues that the county has identified? Or is this a complete block for you to being able to close?

Ashley Kehr:
I can still close. The question is now, if we just can’t get permits, if we’re going to have to dig up the infrastructure, if we’re going to have to have new engineering plans drawn, what are the cost of that? And is it still worth purchasing the property? So it’s just going to be reworking the numbers, figuring that out. So we will see what happens. And there’s a couple other things, too, that are kind of holding it up as to if we go forward or not with the property.
But I have to say, I’ve spent some money on this. I’ve hired somebody to do like a pitch deck for me and really help me fine tune the numbers on this and do a deal analysis. I’ve put money into having the maintenance guy taking around and I’m paying attorneys fees. But I am learning so much just through this due diligence period, even just with the syndication process. I’m looking at it as all that money is an opportunity cost that I’m learning. And if it is a bad deal, it’s a bad deal. And I probably will save hundreds of thousands of dollars if I end up not going through with it. Or maybe it is a good deal and I will go through with it. So we’ll see.

Tony Robinson:
I love all the learning that you’re going through because we’re both, in different ways, kind of trying to branch out into more commercial real estate. But I love that you’re kind of going first because you’re letting me know what questions I need to ask. So I’m selfishly asking some of these questions for myself. I’m sure the listeners are getting some value from it, too.

Ashley Kehr:
I hope so. Yeah. And I was thinking of putting together like some kind of document where make like really fine tuning my list of things for due diligence, for a commercial property too, especially a campground.

Tony Robinson:
Yeah. When you’re done with that, just shoot it my way, too.

Ashley Kehr:
Yeah, I will. I’ll share with everyone, of course. If anyone is looking into learning about due diligence for RV parks, so there’s actually the ARVC, American RV and Camp Count … I don’t know what his stands for. But I think it’s arvc.org maybe, or.com. They actually have a due diligence checklist. You pay, I think maybe a hundred bucks and you can become a member and they have a due diligence checklist. And they’re along with a ton of other documents too.

Tony Robinson:
Yeah. That’s a really good piece of advice. And I just Googled, like, is there some kind of motel owners association that I can maybe find some information onto? So there you go, Ash, you just drop in knowledge all the way through this conversation. I appreciate it.

Ashley Kehr:
Yeah.

Tony Robinson:
Well, we gave a lot of good info, but we also actually have a question to answer today, Ashley, right?

Ashley Kehr:
Yeah.

Tony Robinson:
So someone slid in your DMS, so what question do we got teed up for today?

Ashley Kehr:
Actually, this question today is one of my Boot Campers from the Rookie Bootcamp. And this is Carlos. So his question is, “Hi, Ashley, hope all is well. Quick question, do you recommend or is it even possible to use hard money from a different state? Thanks in advance.” So the short answer to this is yes. You can use hard money from different states if the hard money lender can lend in your state.
So a lot of hard money lenders are nationwide, some are only state specific. The hard money lender I’m working with right now, they’re from Florida, I believe, I think it is. But they can lend in New York. I have friends that do hard money lending in Washington. Some can lend across the country, others cannot. One big distinction that I’ve become to learn is I live in a very rural area and I invest in rural areas. A lot of hard money lenders won’t touch rural areas. So that’s where I kind of ran into trouble is that they wanted to see that population and would only invest in markets that were cities. So that’s something else to watch out for. But yes, you can get a hard money lender from a different state to lend to you on a property.

Tony Robinson:
I don’t think I have much to add to that, Ashley, you kind of hit all the pieces. I guess, my only advice to Carlos would be to shop around. Talk to at least a small handful of different lenders. And if this is your first time using hard money … and honestly, you can use this approach for your first time doing anything, really. But if this is your first time using hard money, the first time you talk to that first hard money lender, just let them know like, “Hey, this is my first time using hard money. What do I need to know about the process? What questions should I be asking you?” And just kind of take note of those things that hard money lender talks about.
And then when you go to have that second conversation, you’ll have a better basis of what you should be looking for and what you can compare and kind of contrast. And with each progressive conversation, by the time you talk to five, you’re going to be a pro in like the different hard money lender options that are there because you talk to so many different people about it. So that would be my only additional advice, Carlos, is that as you’re looking for folks, whether or not they lend locally or nationwide. Just try and get a good pool of people that you can kind of choose from, so you can become better educated in what that process looks like.

Ashley Kehr:
And if one says, no, they can’t do that. Doesn’t mean that another one can’t do it either, too. So if you get one no, don’t take that for an answer and keep looking around.

Tony Robinson:
I know this question gets presented to me a lot. It’s just like, “Hey Tony, how do you find a lender?” Even like regular finance, “And how do you find a good bank or this, that, and the other.” And you can go after referrals. So like if you know other investors that are using hard money, ask them what company they’re going with and a lot of times they can point in the right direction. Go on the Bigger Pockets forums, the Bigger Pockets website, in general. There’s a wealth of knowledge and referrals and resources on that website. The Real Estate Rookie Facebook group to start networking with other people and places where other investors are congregating.
And if that doesn’t work, I mean just Google, hard money lender, X, Y, Z, state, and see what pops up there. And again, just make sure you do your due diligence by asking a lot of good questions. But there is not a shortage of potential money out there to fund your next deal. You just got to kind of put in the work to make it happen.

Ashley Kehr:
Well, Tony, I think we answered that question for this week. And if you guys want to be a part of our bootcamps, I have a Rookie Bootcamp that focuses on the acquisition of your first investment property. And Tony has one that is focused on the acquisition of your first short term rental property. So you guys can check those out at biggerpockets.com/rookiewaitlist to be on the wait list for the next release of the boot camps.
Thank you guys so much for joining us today. I’m Ashley at Wealth from Rentals and he’s Tony at Tony J Robinson. You can find us on Instagram. Thank you, and we’ll see you next week.