All Forum Posts by: Jean G.

Hi Oliver,

I concur with Phil, having money locked up at 3.25% for 30 years is an asset in itself, so you'll want to preserve that, and if you can get money out with a home equity loan to buy one or two more, you'll have the best of both.

You can try Clark County Credit Union for a home equity loan on non owner occupied at 80% LTV.

Jean

Hello,

I buy and hold properties, and I am trying to find a deal structure by which private money lenders would be interested in providing me long term funds at reasonable rates, as opposed to typical hard money (high interest rates, short loan terms) which is intended more for flipping.

I like to buy my buy and hold properties the same way as wholesalers or flippers would, usually 25 or 30% below ARV, which allows me to start with immediate equity (and it creates a buffer in case the market turns). I will also do some basic rehabs if it helps build equity.

One deal structure that I am getting some traction with, and which works well because the properties start out with existing equity, is to pay a low interest rate (say 5 or 6%) over an extended loan term, but offer the lender a profit share on the equity gained upon sale (say 25% of the profit from the sale for example).

So if we take a property bought for $105k today, worth $150k+ at closing (that's actually a real example which I closed in May, courtesy of Homesearch) that may sell for $200k when the loan matures in 10 years for example, the lender would get an additional $23750 profit share at the end of the 10 year loan (I'm not counting selling costs or broker commissions in this example).

Say the loan amount was $80k at 5% interest, then with the additional profit share, the lender gets the same amount of interest as if the rate was almost 10% (I'm probably not accounting for time value of money properly in my math, but hopefully you get the idea).

My question is this: I know that when a passive investor receives equity, this is considered a security and we don't want that. But if a lender gets paid a profit share (which is not equity, but is calculated based on the value of the equity) as in the example above, can anyone say for sure if this is considered a security or not, and falls within or outside the scope of the SEC?

Thank you!

Jean

Hi Devon,

you can try John McClelland at Coldwell Bankers. I've dealt with him a few times and found him to more knowledgeable and professional than your average CRE.

Jean

@Joe Villeneuve

Actually I have a quick question about what you're doing: does your bank that gives you the equity loan do an appraisal, and if so, do you have to pay for that? Or do they do some automated computer appraisal instead of a real appraisal?

Jean

@Taylor Ballam

America First also offers Equity Loans, so make sure to ask them about those too and you may be able to do what Joe is suggesting. It's actually pretty clever, because the equity loans usually don't cost much, so you don't loose much by refinancing twice, but you get your money back much earlier (and possibly a better LTV by being able to wait 6 months).

Jean

@Alex M.

Would you mind sharing with us which company you ended up selecting when you are done (particularly if it's a national company that we can use here out west)? Also the name of whatever policy you got from that company, in case other agents of the company are not familiar with it?

Thanks

Jean!

For those looking for info for the 25th meeting in Henderson, where several BP members including myself attend:

http://www.meetup.com/Henderson-Real-Estate-Investor-Meetup-Group/

Hello,

I ve recently talked to America First Credit union about exactly this. I don t know if they cover he counties you re interested in in Northern UT, but they stated that they may under the right circumstances do a refi off of an appraisal at 65% LTV without seasoning time. I hope this helps.

Jean

Hello,

have you looked into B2R Finance? They told me once that they're able to loan to foreigners. They typically loan across multiple properties but are working on a new single property loan with 30y fixed rate which will soon be available in NV.

Jean

Hello,

I have used Lending Home for an acquisition that didn't need rehab (because the conventional lender we had lined up didn't perform). They closed in 2 weeks from the date of application on their website, and the entire process was very streamlined compared to traditional financing. So we were overall satisfied and would use them again when there is no other choice. It's definitely cheaper than our local hard money lenders who charge more points and slightly more interest rates.

Jean