What are the differences in private lending in Indiana vs Cali?

Question

Hi all,I'm a real estate investor in California, but I also own multifamily in Indiana. I have a private lender here in California that lends against homes that I flip. He's always been resistant to lending on anything in Indiana because he doesn't know or understand the state. And he doesn't want to have to learn a whole new set of rules, regulations, etc.However, he's now open to doing a few small refi loans for me on some houses in Indiana that I own. What he's asking for is for me to put together a summary of all the things he needs to know in order to provide loans in Indiana. Essentially, it's on me to educate him on all the aspects of providing private loans in Indiana to him, and he can make a decision from there.Does anyone have information or resources you can point me to, in order to learn about what is involved when providing private loans against real estate in Indiana? I can do some google searches, but it always helps to learn from someone who is knowledgeable on forums like this.Thanks!James

Andy Mirza · Answer

@James Park I don't like the part of the scenario where you have to educate your lender. That's lazy to me (or a clear indicator that he isn't motivated enough to do your deal) and leaves you open in case something goes wrong. If something goes wrong, is he going to blame you for not informing him about something specific to Indiana that you may have missed?Why not let this guy be your CA lender and you find someone else for Indiana? At a minimum, this gives you some more flexibility. Vendors come and go and it's nice to have ready options in case one drops out and you need to find another one in a pinch.We're doing a refinance of some rentals with Corevest. They lend on rental portfolios.I've also borrowed from Groundfloor but it's been a a year or two. If you're not pressed for time and are patient, you can get some pretty low rates from them.There are tons of other lenders out there that would be happy to lend in Indiana, know that market, and won't require you to educate them.

Don Konipol · Answer

We can start with the basicsCalifornia is a deed of trust state, Indiana is a mortgage stateCalifornia has non judicial foreclosure, Indiana requires judicial foreclosureCalifornia residential loans can not enforce deficiency judgements, Indiana does allow foreclosure deficiency judgements

Beth Johnson · Answer

@James ParkI have a friend from Sacramento who lens on Indiana and he says it can get pretty complicated depending on the county. Apparently each county has different requirements but he didn't elaborate much. Finding a local attorney in IN who does real estate private lending is a smart idea. If you can't find one, Geraci LLP in Irvine sorts private lending businesses all over the country and could provide some helpful support and answers.

Jay Redding · Answer

Hi James: I am based out of Indiana, been investing since 2004, invest in Indiana and have built almost our entire business model with private capital.This includes flips, rentals, long term rentals, tax liens, performing and non-performing notes. We have built our entire private capital through networking with friends, family and associates. No investor has ever lost a dime with us. We rarely do business with banks. I can put you in contact with an attorney if you need and would be happy to talk with you concerning questions that you may have. Indiana is a note & mortgage state (Judicial) therefore it does take longer to foreclose if needed vs say Texas, but typically within 12 months is normal dependent upon court schedule and whether it is contested or not. I agree with Andy Mirza in the fact that it sounds like you are too dependent on one private lender not allowing yourself enough flexibility. I will tell you, when you have multiple private lenders, this non-sense of he doesn't know the rules in Indiana becomes mute. Does he want your business or not. Never ever allow the private lender to set the rules of the game. Always be willing to walk away. (I have on more than one occasion) Which end of the Dog are you? Are you the head or the tail? You are the CEO of your business. It is an attitude, you don't go out begging for money. You are giving the private lender an opportunity to earn an above average return backed by a hard asset that they can touch and see with a consistent and predictable income without the volatility of the stock market. There is a lot of private capital available and you do not need to be beholden to any one lender. With one on one private lenders, it becomes a relationship game and do they have confidence in what you are doing and have confidence in knowing that you are not going to put them in a bad position. If the first thing a private lender says is that he is concerned about the laws in Indiana that he doesn't know, it tells me that they don't have confidence in you yet. I fully understand that they want to protect their money, but that is only a concern if the deal goes bad. Therefore, they don't have confidence in you that you can handle the deal. Not trying to be hurtful here, just being straight up honest with you. If they don't know that you are going to protect them and that you have multiple exit strategies in place that will work to protect them, then you have to ask what kind of a relationship do you really have with them. Feel free to reach out. I would be happy to speak with you directly off line. Not all private lenders are created equal. You need to find the ones that fit what you are looking for.

James Park · Answer

Hi Andy,Thanks for the reply.This lender from CA is a little... complicated. Essentially it's a group of professionals (doctors, attorneys, etc) that pool their money and have a person lend it out. This person is responsible for finding good investments to lend against. And because they have so many opportunities in CA, they don't feel the need to go out of state.The main reason I am pursuing this is because I've tried like hell to get financing in Indiana. But the banks won't touch me (yet) because I recently went full-time as a real estate investor and don't have the stable income history that most banks want. I've tried hard money lenders, but they don't lend against properties under a certain amount ($75K) and they have all kinds of stipulations as well, and I ultimately couldn't make it work.I don't know any private lenders in Indiana. I tried to find some, but didn't have much success. So now that my private lender in CA is showing some willingness, I want to see if I can make it work. I'm ok educating him as long as I can see this expanding and being a long-term arrangement.However, I'll give Corevest and Groundfloor a look. Thank you for recommending them. And I'm open to any other suggestions you might have. Nice to meet another Californian who invests in Indiana!

Chris Seveney · Answer

@James ParkI can put you in touch with an attorney and that would be your best bet