Question to borrowers of HMLs out there

[Rich Weese]

I still get a few requests for HML or transactional loans. I'm just curious. Those that are actually doing or trying to do deals, this is for you.
1. Are you finding the loans?
If yes
2. Do you have skin in the game? If so, what %?
if not
3. Why do you think you're not finding the loan?
4. Are your lenders normally local?
5. Actual rate you"re currently paying
6. Would you say this borrowing system has been a success?
If so, why and what would you suggest to others? Rich

[Vikram C.]

Rich, HML is fairly easily available for flips. Here's what I have found:

1. Most HMLs expect the client to put about 35% to 20% of the acquisition cost, not including rehab expenses. New clients generally get less funding (65%) and clients with an established track record get more (80%).

2. The interest rate is 18% per year. I have not seen even one HML offer anything different, which suggests either collusion (unlikely) or a very competitive market that has made prices commodity-like (more likely).

3. Most HMLs do not use their own funds for lending. Instead, they have a large network of wealthy private investors and they pass on 75% of the interest collected to the private investor network. The private investor gets a rate of 13.5% as a result and the deed of trust is often directly in the name of the private investor. I know all this because one of the HMLs wants me to be part of his investor pool and was explaining all this to me.

4. HMLs typically charge between $800 and $1000 as a processing fee. As a matter of fact, this fee seems to be a big part of their profits and some of them seem to prefer smaller loans and shorter periods - they get to make more fees per dollar invested and more times per year.

5. The typical loan period is 6 months or 12 months. The 6-month guys are willing to extend it by another 6 months if needed.

Please let me know if you need any other information.