Private Money Lending in Columbus, Ohio For The Long Term

[Patty C.]

Hello! I need some help in figuring out how to help a friend's family with small children live in a safer neighborhood.  

(The person I know applied for a loan and everything was going smoothly. The bank seems to be pulling back now, but it may still go through, and she does not understand why. She is looking for a back up plan in case the bank does not come through.)

@Bill Gulley : taking you up on your offer to tap your knowledge base.  :-)

Here is the scenario: A person I know wants to buy a house for her sister in Columbus, Ohio. Her sister will rent the property (and buy it from her at a later date --- lease with option to own). My colleague says she has an 800 credit score, and plans to put 20% down. She said the house appraised for $61,000 and they have it in contract for $52,000. She also plans to do about $9,000 in repairs with her own money. It is a SFR in a primarily O/O area in a "C" area. This part sounds fine.

"Lazy" money is sitting in a roth so I was going to open up a self-directed IRA and self-direct.

From what I can see, Ohio is primarily a mortgage state and they only follow the judicial process. If foreclosure proceeding is needed, the downside is the cost because of the low loan amount.

I'd like to help this family out, but also want to make this a win-win situation and be compliant in how the note is structured. This will be my first time of loaning money.

I plan to ask for the information a lender uses, go through escrow, and get title insurance.

Questions:

What would you do to structure an adjustable interest rate if you were amenable to doing a 10, 15, or 30 year loan? I am anticipating interest rates going up and want the money keeping up with inflation.

What are some options for structuring this if the preference is not to own out of state property?

If the the borrower has property in California, how can it be used to collateralize the loan in case of non-payment to off-set the risk of Ohio being a foreclosure state? I don't know Ohio's housing market and more comfortable with properties in California.

Is there anything else to think about?

Any suggestions would be helpful.

Thank you!

[Bill Gulley]

Originally posted by @Patty C.:

Hello! I need some help in figuring out how to help a friend's family with small children live in a safer neighborhood.  

(The person I know applied for a loan and everything was going smoothly. The bank seems to be pulling back now, but it may still go through, and she does not understand why. She is looking for a back up plan in case the bank does not come through.)

@Bill Gulley : taking you up on your offer to tap your knowledge base.  :-)

Here is the scenario: A person I know wants to buy a house for her sister in Columbus, Ohio. Her sister will rent the property (and buy it from her at a later date --- lease with option to own). My colleague says she has an 800 credit score, and plans to put 20% down. She said the house appraised for $61,000 and they have it in contract for $52,000. She also plans to do about $9,000 in repairs with her own money. It is a SFR in a primarily O/O area in a "C" area. This part sounds fine.

"Lazy" money is sitting in a roth so I was going to open up a self-directed IRA and self-direct.

From what I can see, Ohio is primarily a mortgage state and they only follow the judicial process. If foreclosure proceeding is needed, the downside is the cost because of the low loan amount.

I'd like to help this family out, but also want to make this a win-win situation and be compliant in how the note is structured. This will be my first time of loaning money.

I plan to ask for the information a lender uses, go through escrow, and get title insurance.

Questions:

What would you do to structure an adjustable interest rate if you were amenable to doing a 10, 15, or 30 year loan? I am anticipating interest rates going up and want the money keeping up with inflation.

What are some options for structuring this if the preference is not to own out of state property?

If the the borrower has property in California, how can it be used to collateralize the loan in case of non-payment to off-set the risk of Ohio being a foreclosure state? I don't know Ohio's housing market and more comfortable with properties in California.

Is there anything else to think about?

Any suggestions would be helpful.

Thank you!

After posting this, you'll probably be hit up with all kinds of "opportunities". 

Sometimes proposed borrowers talk too much, like saying " I want to buy this, rent to my sister and later do an option for her to buy it" that's too much information and she really doesn't know that will be the case. It should be "Hi, I need a non-owner occupied loan". 

Often, communication slows during loan processing, borrowers get nervous for no reason so don't have her rock the boat.

You may be exempt under DF doing one loan in CA. And, at this point, they are known to you, you're a private lender, not a hard money lender. 

If there is sufficient equity in the CA property just use it. You can make a "cash out" first or second using a standard deed of trust. 

While you may be exempt from DF, the note should still be compliant simply to avoid issues in foreclosure. You should also be using a note servicer. 

Speak to your attorney in CA as to drafting. You should also talk to a mortgage originator RMLO, the value of your note will be worth much more if a RMLO seal is on the note. :)