All Forum Posts by: Yan P.

Eric,

I thought about it further and see what you mean by end sale price. The premium could be a proportion of the sale price.

Eric, I did not want to offend you in any way with this post. That is the reason I did not mention your name. After I explained the loan the second time and you decided not to pursue, I did not want to bother by asking more details of the reasoning since I am looking forward to using your services in the future. But this is exactly the kind of feedback I am looking for. To address your concerns, please look to the following:
Using my father as a contractor: My father has over 15 years of experience specifically in the City of Chicago. He has been the general contractor for over 1000 units, knows a majority of the inspectors in the city and exactly what they look for. There are very few contractors I know with those same documented credentials. That being said, if it is of major concern, I have no problem with a preferred contractor being used. I originally thought of this as a plus for a lender since you would not have to go through the search yourself. I was very wrong.
Locked in end price: The end price is your cost plus a negotiated premium (profit). I did not indicate how much profit I was offering because that is a point of negotiation. Since I know less than you do about the HML business, I thought if you throw out the first number then we could work from there.
If something goes wrong and I cannot purchase: This is the point of the escrow (also negotiable). If for any reason I cannot complete the sale, the amount in escrow would be transferred to you. It would provide cushion for a quick sale. I believe this is the same exact concept as down payment except for timing.
End financing: I believe that the most I can do to lock in end financing is by being pre approved for a loan. I am very open to showing my financial strength to a lender (No scammers please). If there is anything more solid I can do to, please let me now.
FHA 203(b)(k): You referred to a red flag being my disinterest in the FHA 203(k) rehab loan. Before the process starts, I would be preapproved for the 203(b). The reason I am not interested in the rehab 203(k), which you correctly stated is specifically for this case, is because I have spoken to an individual going through that loan currently. It took her 4 months just to acquire the property for a decently higher price than could be with cash or HML. Further, it is true that the construction costs are financed into the loan, but you have to use their contractors who know that you are not paying out of pocket. The reality of it is that they increase prices for that reason. She ended up doing a lot of the work that was not specifically required to be done by the contractors with her husband to save on what she described as “Outrageous†costs.
The lender would supervise the project throughout. If you put a rehabber into the mix and a down payment at the beginning of the loan, it would be a regular HML.
Again, I understand that this is not the typical HML and thank you for taking the time to post your opinion. I am taking what you saying into consideration. If anyone can suggest a better structure, I am all ears…

Thank you Bill, that was my thought process too. I feel more comfortable with pitching it to further HMLs. If anyone else wants to jump in to offer their opinion please do so. I think I will post this in seeking financing soon.

Bump... I am really interested in seeing the opinion of the experienced players before I pitch this plan to more HML's or PM.

Thank in advance guys

I have a question on how to structure the following strategy to be more appealing to an HML or Private Money.

The idea is to set up a 2-4 flat rehab to eventually purchase myself, legally. I would find a property to acquire, have the HML/PM acquire it and rehab with their own funds. I would sign an agreement to purchase the property for a fixed premium over costs. I will be pre-approved for an FHA loan shortly. Instead of putting money down in the beginning, I would escrow it. If I cannot get financed, the money in escrow would go to HML/PM as security.

Basically the HML/PM has an obligated buyer in exchange for lower profit, all secured by money in escrow. The only difference between a regular hard money loan is when the security is received by an HML and there is no rehabber in the middle. More cash left for HML and I.

I pitched it to a local hard money lender who was not interested. The risks seem less then normal since the HML/PM knows that there is already a qualified purchaser: me. I would like to make it more appealing before I continue the roadshow. Any ideas?

Wow, so you are saying insurance might not cover it. That is a bad spot.

I normally do not post useless stuff like this but could not help myself. This is one problem I hope to never have.

http://www.cnn.com/video/#/video/us/2010/12/04/la.apartment.waste.cnn?hpt=T2

Welcome to the forum!

Good to see members joining from Illinois. Experienced ones at that.

Also, how often does it adjust after the 3 years have expired? Thank you

Financexaminer,

2 over 11 Dist COF would currently put you at about 3.6%. Seems like the only way one can get those rates is if you camp out in front of the discount window to be there right when it opens before chase and boa have time to lobby. I am always learning so feel free to provide feedback.