Goodbye Mr Bailey--I Am Going To Miss You........

[John Thedford]

Goodbye Mr Bailey.....i do wish we could continue our relationship!

Backtrack five years ago. At that time I was just starting to acquire SFR. I was referred to this man by a local attorney when I asked if he knew anyone that did private lending. When I first approached him he flat out told me NO--he would not lend on vacant land. A couple phone calls later and I convinced him he would have -0- risk of me defaulting. So, I got him to give me 80K at 6.25%. Not a steal, but certainly a good rate (in my mind) for private money. This allowed me to obtain a SFR. The loan was written for five years interest only. I am no fan of interest only-after five years I would still owe the entire amount. So, I did what a responsible borrower would do--I started making amortized payments. Four months later, I asked for more money to acquire another, and he told me I was his worst borrower and he would not deal with me. What? Turns out, he didn't want to be bothered having to recalculate every time I made a principal payment. So, after some incessant begging from me :):)--he agreed to give me 85K more, amend the original mortgage, pledge another free and clear house, and purchase another one with the proceeds. Along came Dodd-Frank, and that scared him to death! His attorney wasn't helpful either, and so my friend decided to quit lending. Last month I made the final principal payment, got a SOM signed and notarized from him, and that was it. I lost a great lender...thanks to Dodd-Frank even though my loans don't fall under consumer loans. Before parting ways at the bank, I casually mentioned I would be in the market for 1M. He told me to call him--so I will see how that plays out. Before I end this post, there is the ago old debate--pay it off or stay levered...and if I had the chance I would say stay levered. CAREFULLY levered--not some 90% play. Now, I have to convince him to give me more money, or find another source. Leverage IS one of the keys to growth! I do sleep better at night owing less money, but when there is no cash in the bank to acquire more properties that is a worse thought keeping me up!