Hard/Private money question's

[Shannon X.]

1) What happens if you borrow a loan but your projected time to sell is not on time and do not have the money to pay back?

2) How do they give you the money? Obviously before looking for houses you need the funds, do they transfer the monies to your personal checking account or a special account created with the lender?

3) Do you begin paying the lender back as the project is going underway, or do you pay back completely in whole after you sell?

I'm only asking to begin learning about lending options.

Thanks

P.S.

Are their any spreadsheets available to use to pretty much shows projected profit after inputting all the information in regards to the deal?

Thanks again

[Jon Holdman]

My quick answers.

1) They take the property. Either you make it easy and do a "deed in lieu of foreclosure" and just give them the property without a fight or you fight it and they go through a foreclosure. I've been on the lending end of a deal like this and the borrower gave me a deed in lieu. In exchange, I didn't pursue him. Had he forced a foreclosure, I would have sought a judgment for the shortage.

Realistically, you would try to negotiate an extension. I had one of these, too, and the borrower didn't want to pay the charge for the extension that he had agreed to up front. So, I said no extension. He found another lender to get a new loan to pay me off.

2) No, you don't need the money until the actual closing. It would be wired to the title company by the lender. The title company then distributes it. After the closing, the title company distributes it. A big chunk goes to the seller and/or the seller's lender. Smaller chunks go to various other folks like the title company, the county for recording fees, insurance, etc. If there is repair money, that typically goes back to the lender and goes into an escrow account. As the work progresses and the lender inspects your work, you would get paid the repair escrow in increments.

If you have to put some money into the deal, too (which is commonly the case), you would bring that money to closing. You would either wire it in or bring a cashier's check to closing. The title company will tell you the exact amount shortly before closing.

3) Depends on the lender. Sometimes they (and I'm in this camp) want to see monthly interest payments. Sometimes the lender will agree to get paid back both interest and principal at the time of the sale.