All Forum Posts by: James H.

It would take a LOT of leveling compound to fix that. Probably going to be a little more complicated than tossing some leveling compound down. That's a pretty big fix no matter what way you go about it, so I would do some real fast soul searching to determine if this deal will work without fixing it. As J said, even if it did need fixing, as long as the numbers are right, do whatever. I would expect this to be pretty expensive to fix (think in order of magnitude of thousands).

Its kind of tough to believe there is not some other underlying problem driving the condition. The only thing I could think that would make this problem exclusive of any other problem would be that it was built like that, which is possible, but probably the least likely.

But I can't see the house so take what I say with a grain of salt.

$3,000 seams like a lot of earnest money. Why so much?

Looks like this thread was started a few years ago, but since others may read, I'll put in my .02.

If I had the money to pay a mentor/coach thousands of dollars, I would just use it to get into my first property instead and attend local REI groups and read up here on BP. If you can't figure it out without a coach, you likely don't have what it takes because you are looking to get spoon fed.

If you need help with legal items like contracts, pay a lawyer to make them up for you (its not that expensive). He/she would surely explain to you how to navigate the forms you paid for.

The most important thing you can do is the hardest thing, and that is to get the property at a big discount after accounting for all items to make it rent ready. If you have a good deal, you can't hardly go wrong with interest rates on a mortgage today. If your credit is good enought to get a mortgage, you WILL get a historically great interest rate.

How much is it sloping. Give answere int terms of inches of fall per foot in run.

Travis, Thank you very much for the input. I am by no means trying to paint any type of negative light. I am mostly just trying to see what the "worst case scenarios" are when dealing with Hard Money. I didn't mean to put the risks as "negative" persay. I understand that any type of gain involves risk and I would agree that there is a definite cost to NOT taking risks. But I am also an engineer - we deal in factors of safety!

So far, if everything just went to crap, it looks like the worst potential situation (barring unusual circumstances) would be a foreclosure on the credit and I assume a judgement for any monies the HML could not recover from liquidating the forclosed property.

I am not saying this is common place, but I spoke earlier today with a real estate agent that works with investors and recommends an HML. He relayed a story to me about an HML that was not cooperating with a client on an extension (in a typcial situation where an extension wouldn't normally be an issue) and that it appeared that the deal was so sweet the HML kind of DID want the property. I don't know the details of the deal, though. How common are unscrupulous practices in the HML scene?

That's exactly right. With even just one or the other of 100% inflation and 50% unemployment, it would mean CIVIL WAR. And I don't think it would take even close to 3 years for it to fully manifest with those conditions.

Thanks for the repsonse Marc.

I also wanted to know what other repercussions could occur. For example, consumer creditors will report you to the credit bureau for the amount owed plus whatever inflated fees associated with the delinquent account they think they can get.

If an HML forecloses on a property, do they also have punitive fees that they hold over you after the foreclosure? Do they report to the credit bureaus? Do they sue for the difference if they can't unload the foreclosed property for what they have lent on it?

I am just trying to get to know more fully what I am getting into with hard money, so I know: A) if I should even consider approaching an HML and B) what to expect from a typical HML contract.

I have been considering the idea of using HMLs in the future. Not that I would plan to, but I was hoping some of the HMLs or folks with experience borrowing from HMLs could describe what happens if you default.

So far, this is my understanding of the use, benefits and risk of using hard money:

1) + access to cash you don't have or do have and don't want to tie up.

2) + Short term financing that can be used same as cash for discounted purchases and expediting closings and ability to purchase properties otherwise not financeable with a mortgage due to property condition.

3) + Short term financing for rehab costs.

4) + Debt that does not count against your debt to income ratio when looking to refinance the property after rehab is complete.

5) + Refinancing terms of HML is typically easier than doing a cash-out refi.

6) – Terms/up front fees of Hard Money demands higher margins on a deal.

7) - Most hard money is for 6-12 months, but mortgage lenders may require up to 12 months seasoning which would create a default on the HML or a fee generated to extend the HML if mortgage lender required 12 months seasoning. (unless you could refi exactly the same day that HML expired ).

8) - One cannot be certain that long term financing will be available for long term hold investors even once seasoning has been satisfied.

9) - Less experienced rehabbers may not have enough experience to flip a house in time or within budget to not default on the loan.

10) - HMLs will require a licensed contractor to do the work so DIYers can't save by doing the work themselves.

So this is my general understanding of Hard Money and how it can work for and against an investor. I may not be right on some or many points - please correct me where I misunderstand.

Ultimately, what happens if you default on the HML and/or can't afford to pay an extension? I assume that the HML takes the property and you loose any cash you have invested in the deal. What other negative repercussions usually happens and/or could happen?

That's an excellent observation. Tiles will be slippery when wet, stairs are very narrow and no handrails. I would do something about that.

With those numbers (assuming he has accounted all his expenses) who cares?