All Forum Posts by: Jason F

I'm new to the forum and posted this somewhere else prior to finding this section. I love how many areas this forum has, it's great.

On finding private hard money lenders: Has anyone toyed with the idea of really marketing to people that otherwise do not invest in RE. I am constantly speaking with doctors, attorneys, business owners, who have plenty of investable income but do not want the hassle of dealing with RE. I tell them what I do and they seem fascinated by every aspect of RE and want to invest. Obviously any RE investor knows it takes a lot more research and time than most people think. These people, having their money in CDs and low interest accounts would most likely be very interested in loaning money for projects, mortgages or purchasing notes.

I'm just thinking they might be a little let scrutinizing (if that's a word) then most of the Professional Hard Money Lenders you run into. I'm thinking they might actually be happier with a little lower rates as well.

Anyone have any experience with this? What did you do? Did you set up LLC's between the parties or just treat it as a normal loan with a note/mort at closing?

Thanks,

J

I have been thinking a lot lately about finding an easier way to finance the SALE of the rehabs that I own. Most buyers look at the house, love it and want to buy it. They ask if I can finance/lease-option but I am more interested in just selling the property and moving on. I turn them over to a mortgage broker I have and he either gets them financed or someone else does or they don't get financed.

Well I think there might be a solid demand for private lenders interested in these mortgages and other lending opps I come across daily. I'm not talking RE investors, I mean people in the community that have money earning very low interest rates in CD, IRA's or savings accounts. Obviously for someone that invests in RE all the time, a 10% return on a 90% LTV loan will not be enough juice for them. It's just not exciting enough for the risk. But a majority of the people that don't normally invest in RE would probably love those returns. Not to mention the occasional opp. for them to buy a note at discount, finance a very low LTV property, etc. I think when presented with one of these loans they would see it as a much less maintanence than buying a rental. It seems like a lot of RE layman that have cash laying around just go out and buy some rentals and realize how badly they suck.

Has anyone had any experience marketing to people that may not actually be RE investors or hard money lenders but just regular people looking for a decent return compared to what they are investing in now. It's something I'm looking into. I see a lot of oppurtunities on a weekly basis that might be a little to low of a return for myself but others with their money in CD's and mutual funds would most likely love.

Thoughts, opinions?

Before you do an ounce of "marketing" I would make sure you know the in's and out's pretty well. I would also make sure you are ready to act once you do get some response from who you are marketing to.

It would seem silly to spend a lot of time and money on a marketing campaign to get responses and have no money to buy the notes or not really know how much you should pay for it. RE professionals will see right through you at your initial meeting with them if you don't know what you are talking about.

It's very tempting to do a deal because the owner is financing it for you. Don't forget the basics, buy property for less than what it's worth, not just because you are getting just a little money down.

In negotiations, break everything down into pieces. Do not ask the buyer for a low price, low down, low payment, etc. etc. Ask them for a low price, get them to agree and start the paperwork. Then tell them you are going to have to get a mortgage and it's going to take a while, see if they will rent you the house. When they say they will rent, that means they like the idea of cash flow. Then mention owner financing, it's better for them than renting, no issues to deal with. They say okay. Now say you want payment to stay around $900/month. They say okay. Don't talk in rates, talk in payment amounts.

Ease into all of this rather than calling them and asking for the world. I hate when people call me about a house I have for sale and before they ask anything about the house they want to know if they can take over payments or finance it, etc. etc. They are more concentrated on how to buy the house rather than if they should buy the house. Definitely someone who just set down the "Creatively BUY Houses" book.

Make sure it's a good deal. If it is, you will be able to find a way to buy it. If it's not, don't buy it. It sucks to leave a house that you could have picked up, but there are a lot more.

I think you are saying that you have a loan on the property at 7% and you want to find a buyer and finance their purchase at 9%, therefore making a spread.

You will not be able to transfer title fully to the new buyer if you do not first payoff your loan. You can do a contract-for-deed, but the property will still remain in your name.

I think that is what you are getting at. If you own the property outright you can finance for people all day. I would go a little higher than 9%.

In theory it is easy but in practice I find it to be A. difficult and B. kind of nerve-racking.

First you have to find a buyer that will sign over the house and agree to leave their mortgage on the property. So basically they are still on the hook for their loan. Then you have to find a title company that knows what you are talking about. The first time I went through atleast 8 before I found mine. Obviously you are going to want to give the seller's some cash so it motivates them to show up for the closing. Then, until the house is sold you are going to constantly be worried about whether or not your loss mititgation department at the bank is going to wise up to you taking the deed. Any problems with the loan you have to call the 800 number in India and getting anywhere with those people is impossible to begin with, much less if you are not the person named on the account. This also holds true for when you need the payoff figures.

All and all it is difficult to find these deal, but when you do and you get them to go through it makes for a very low capital, profitable deal.

In my opinion you are much better off finding a property that a seller owns outright and is willing to sell with financing. You can negotiate some pretty good terms for yourself. With sub2 you are paying the rate that the borrower was paying.

They will get notice because they are named insured. Will they care, especially right now, probably not.

On the sub-2's that I've done I've never changed the insurance. Mainly because it was a quick rehab and not a long-term hold. But then again, I really dislike insurance to begin with.

it also depends on who you are selling it to. find a friend or someone who is looking for the cash flow rather than a 'good deal'.

a shrewd business man is a honest business man. bring a note to a note buyer and expect to get a much lower price than someone else.

I think there might be a demand for new notes. However, i think most RE investors realize returns are much better on discounted notes.

That being said, there are a lot of people out there that don't have the time to look for notes and would really just prefer the cash flow from holding a mortgage for a buyer or investor withouth the need for a discount.

i think the value of the note, other than the loan terms, depends most heavily on the following.

LTV
Position of the Note

All the other stuff could be overlooked and when push comes to shove this is what is going to matter.

If you are buying a $100k first mortgage for $20k on a property worth $150k, who cares what the credit score of the buyer is or their debt-to-income ratio. If they foreclose you either get the deed or take them to auction. Either way you are coming out ahead. To tell you the truth, you want this borrower to pay the note off the day after you buy it. That's a quick $80k.

The only problem you run into is if they declare the B word.

Getting $80k