@Rafaella Almeida - Your welcome. Happy to help. If you watch my posts, I tend to write fairly lengthy responses. Most people give a brief answer with little to no explanation. It's hard to learn without the details and reasoning. Let me know if you need anything else.
@Darius Ogloza - Yes, I will do a non-recourse loan to an IRA. However, if it's just to an LLC, I will ask for a personal guarantee, but I don't make you pledge your personal residence as collateral. In almost every state, your personal residence is protected from creditors. So, the only way a lender can take your house is if you pledge it as collateral. Many lenders, myself included, make you sign personally more as a scare tactic than anything. We want you to feel responsible and not bail on the project at the first sign of trouble. We use the personal guarantee to alter your perception of the deal you have with us. In the 11 years I've been lending, I've never gone after a borrower personally. I know the risks. I accept them. Plus, our 65% LTV makes sure that there's enough equity in the property that there should never be a case where we need to go after the borrower personally. In this same time frame, I've also only had 5 foreclosures. I work very closely with my borrower. When things start going sideways, I'm there to help them dig out. While it's more profitable for me in most cases to take the house back, I'd rather have a borrower come back repeatedly. It's more profitable for both of us. I know not all lenders take this level of personal interest in the success of their clients, but I do. I only work in Wisconsin. It's a small population state. But, the principles and details of lending/borrowing are the same across the country.
@Odie Ayaga is spot on with what he says about our rates being too high. The cost of doing business is relative to the risk. @Ian Walsh is right in challenging the definition of risk. The risk is different from person to person and from deal to deal. Lenders have criteria in place to help them decode if the property that the borrower is requesting funds on is a good risk to the lender. It's no different than when a bank does a major probe up your backside to determine your value (risk) to them.
Odie is also right when comparing HML's to contractors. Hiring contractors come with a cost and a risk as well. A good HML is your financial partner in the deal. They are not your enemy. They are an extremely valuable tool in the right scenario. Does that mean that every property and person should use HM exclusively, we'd love it if you did, but it's not practical nor right for every deal.
There's no such thing as a blanket one size fits all answer to which way to go. The final answer is whatever is best for you and the deal your doing. People have gotten in over their heads with both options. Gather as much information as you can and make the best decision you can with that information. If something goes wrong, ask for help.
Good Luck!
