All Forum Posts by: Joshua Andrews

So I'm a little confused regarding non performing 2nds. Most I've seen have combined LTV equaling negative or at a minimum 100% equity. Meaning there is no "real" equity protecting the 2nd position.

I've heard various scenarios of workouts with the borrower, settling for less, etc. But how can an investor make money when there is no equity and the borrower wont settle, do a workout or basically tells the note holder to pound sand?

I've heard that yes, you can foreclose from the 2nd position but how would the investor make any profit when there is no equity to begin with? Almost seems your at the mercy of the people who want to cut a deal with you, and the rest you cant do much about. I'm sure I'm mistaken here. Just trying to understand the model.

Appreciate any feedback or possible scenarios from seasoned investors out there!

I'm living in Phoenix and would like to network with fellow note investors, new or experienced. Message me if interested!

Bill thank you very much. That is extremely helpful. I believe I understand how to create it now using a basic template. I like the creative names lol

Very good I appreciate your feedback. I have purchased homes and cars before, so I've seen what they look like. The loan is not secured to real property, but I do want something in writing between us. I will contact a lawyer today and see what they would charge to write up something simple just so I have my basis covered.

Thank you both.

I am in the process of loaning my brother money in regards to a partnership between us to purchase rental property. I would like to have a NOTE in place at the minimum APR just so we have something on file should I want my money back, etc.

I have never created a note before, and am unsure of the language needed. Can anyone advise where I would go to get this done inexpensively? I have contacted two title offices, and they seem to be of little help. I can have an attorney do it, but at $300 an hour for a two page document, it seems a bit steep. I will go that route if its absolutely necessary.

Any thoughts on how I would get this done or who I can use to help me create the note?

Will and Ned,

Thank you both for your feedback. It appears to be a broad stroke rule of thumb and was a little discouraging when I read it initially. Seems like there is a large variable of leverage which would not make it too terribly accurate.

I know rule's of thumb are just that - a rule of thumb. It's nice to hear your thoughts on this one. Thank you both!

I recently read about a rule of thumb for apartment investments and I'd like some BP member feedback.

The rule of thumb goes like this: "For every one million dollars of real estate you own, it should be cash flowing $2,500 per month."

This number seems a little low to me, since you would have to own a ridiculous amount of apartments to ever set yourself free financially.

Has anyone heard of this rule of thumb, and if so what are your thoughts? It's not making a lot of sense to me when I run the numbers.

Thanks Joel,

I don't have the property identified yet, I'm basically at the "getting pre-qualifed" stage. Property will likely be fully performing and between 6-10 units depending on deals available.

Sounds like it may be beneficial to contact a few local banks to start lining up financing for something this small.

Really appreciate your input. I've followed much of your posts and have a lot of respect for your advice. Thank you!

Seeking advice on commercial financing.

I am preparing to get commercial financing for a small multifamily purchase. It will be commercial above 4 units and 300-400k range.

I am a residential lender so am intimately familiar with pricing and figures for residential, not so much commercial. Wondering if I could bounce some basic commercial questions off you guys or if there is a resource you suggest?

Kerry,

Depends on what you want out of the loan. If I understand you correctly you own the home outright currently and your son lives there. Some quick answers for you....

1. This would not be commercial. Commercial is only for 5 or more units. You still fall under residential no matter what loan "product" you choose.

2. Yes! If you have even one renter you should have it in an LLC, land trust or both depending on your needs. Refer to an asset protection attorney for more on this.

3. Too many variables here to give you a straight answer. Basically some of the differences between FHA and conventional financing: FHA has a 1.75% upfront funding fee, monthly mortgage insurance which is now 1.35% of the loan, and can lend up to 85% cash out with no hits to pricing (read rate).

Conventional will have hits to rate, (read higher rate), no mortgage insurance and funding fee, but possibly points if you want to get the rate lower. Difficult to give you an exact $ figure unless I have all the details including FICO scores DTI and income.

Really depends on what your long-term plans are for the property. There is no "right" answer unless you have a definite plan. Then you can compare the numbers and you'll have your answer.

One thing to note on the appraisal... lenders wont be using the income method to value the property... it's still considered residential. So your value will be determined by comparable sales in the surrounding area - not your rents.

Hope that helps.