All Forum Posts by: Haven M.

Hey All,

My wife and I are looking to buy my wife's grandmother's house in Massachusetts and grant her a life estate. Given the interest rate increases recently, we would like to buy it subject to her current mortgage and be able to give her some cash in process. Does anyone have any experience with this type of situation?

Hey Faiz, I'm a private lender and do lend in Illinois. I can tell you that my group very rarely lends to people with no experience. I don't want to dash your hopes completely because it has happened, but you'll have to build a really solid case that your deal is a good one, that you can manage the project, and that you have numerous exit strategies in in place in the event that plans A and B don't work.

There's also not really such a thing as "Pre-Approval" in hard money lending because the deal is more contingent on the asset, and not so much the individual. I can't even begin to work through an application process until I can see the contract for the purchase of the property. Without the contract, there's really not much to go on.

Feel free to PM and I can get in touch to maybe give you a better idea of the process and what you'll need to get in place to stand a chance.

We range anywhere from 8-15% on a shorter term loan with anywhere from 0-5 points. Depends on the deal and the borrower. 

We also do 30/5 loans with lower rates, but there are charges for an early exit on those because the rates are lower. 

Hi Albert,

Here, again, is where you'll see differences. My group has both long and short term loan options. On a shorter term loan (6-24 Months), we're not concerned with personal credit, but with a longer term product we want to see personal credit. 

There are bad players out there, like any other field, but there are a lot of good Hard and Private lenders out there as well. As for vetting, start with an initial conversation and just get a feel for them. 

Good lenders are going to ask a lot of questions towards finding out IF you're a good bet to service the loan. If you talk to someone and they're making huge promises and saying they can throw millions of dollars your way without knowing anything about you, that's probably a sign they're not great at actual lending and are more interested in collecting as many fees and points as they possibly can.

Good Hard and Private money lenders will act very much like a bank would. Yes, we're lending based on the asset, but we still want to know about the person who is going to be managing that asset and feel like they can handle it if something goes a little sideways with the deal.

If you're not looking at buying right now, start reaching out and having those initial conversations. You'll probably get a pretty good feel just based on the tone of those conversations what kind of firm you're dealing with. Then have second and third conversations with the lenders you feel the best about to establish a relationship and clarity on their process when you are looking to buy. 

That depends entirely on your plans for the property. Are you just buying a turnkey Rental property? Are you looking to BRRRR the property? Is it a property that will even qualify for traditional funding?

"Pre-approval" is a bit of a Myth. I can get you all excited by telling you based on your experience and credit that I can loan you up to $5MM. If you then bring a deal to the table that just isn't a good deal, I'm not going to lend you anything. 

You'll see all sorts of numbers in the hard money arena, depending on who you cross paths with, including people trying to get more than the range you mentioned. 

Unfortunately there are a lot of lenders out there looking to prey on Newbies so they'll try to jam as many points in there as they can. They're not interested in a relationship, they look at every borrower as a one time customer and want get as much from that one deal as they can.

The good lenders want to be reasonable (and, yes, still make money) and work with the deal because they'll want you to come back to them for your next 20 deals as well.  

The biggest red flag is if they start asking for payments on the front end of the deal. Like an upfront origination fee before they even know anything about the deal and whether it will get funded.

Points and fees will be different from deal to deal because it's the risk profile of the deal that determines the cost. 

Do you have something under contract that you're looking to fund? If a lender says "I can get you $xxx,xxxx, with x points at x% interest" without having looked at the actual deal you're working on, they're probably just blowing smoke.

Get in touch with your lenders, if applicable, and negotiate terms. There is flexibility given the situation, and you can pass whatever flexibility you can negotiate on to your tenants.

If you think rushing to evict at this point is wise when we have no idea what the next 6-12 months is going to look like, you may be thinking a little too short term.

Hang tight, Roderick. I have some things in the works. Working on a non-RE business deal in Newburyport currently and looking to get a Newburyport group going once the deal is completed.

Shoot me a PM, and I will keep you up to date.