All Forum Posts by: Jerel Ehlert

1st caveat:  most laws affecting real estate and private lending are governed by state law.  If you are dealing with consumers, there are a batch of federal laws.  So anything you read may not apply to where you are doing business.

If you are going to lend money for rehab/flips, look at what hard money lenders are doing and requiring, and do most of what they do.  Appraisal, inspection, title closing, insurance, etc.

If you have never flipped, do that first so you have some idea of what your borrower should be doing.  At least one time.

If you don't want to do what HMLs do or at least one fix/flip, lend money with someone who has/does.  For instance, if the total loan is $100K, you put up $75K and the senior lender puts up $25K, and you both split 50/50 (because you don't know what you're doing and they run the deal).

If you don't want to do any of that, don't do anything.  You are too dangerous and will loose your own money.

@Sarah Davis That's a pretty big freakin' material term they failed to disclose.  

Either call a breach of contract and walk or make them personally guaranty collection and payment of rent for the entire occupancy, or they deal with the eviction and give you the property with both sides vacant.  And I would make them guaranty rent for so long as that tenant occupies the unit.  That kind of fraud by non-disclosure should carry through that tenant's entire lease.

@Account Closed I'll spare you the sermon, but the short of it is this: in Texas, you are better off doing sub-2/wrap than L/O for lots of good reasons. A good RE lawyer can go through the details if interested.

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Hi Adam, thanks for the mention.  I started out as an investor in 2000 when CFDs and L/Os were still a thing, and watched as the Texas legislature gutted them because shady investors abused these tools.  It was after the crash I went to lawschool and became licensed as an attorney.  Buying notes/liens and underwriting is part of what I already do for others.  Let me know how I can help.

Congrats.  Moratorium applies to evictions FOR UNPAID RENT.  It does not apply for lease violations or holdover.  If you are suing for possession only, it can still go through in Texas.  I can't tell you how other states are handling these.

You can borrow from someone else's IRA to pay syndication fees.

You can lend your IRA to others.

If this is to let the current tenant out of their lease, you should thank them and run all the usual checks as for a new tenant.  The benefit to you is no vacancy or marketing costs.

Private financing should not differ that much from traditional or HML financing. The advantage is that fees for doing the loan are less. Due diligence should be the same (appraisal and inspection, etc.). At minimum, a note and lien instrument. Record what gets recorded. Close at a title company. Use a local lawyer to draft docs who is familiar with this type of transaction.

I draft these in Texas.  Here, it is a promissory note, separate deed of trust with power of sale, and warranty deed conveying title from seller to buyer with vendor's lien in favor of lender.  Close at a title company.  Deed (title) and deed of trust (lien) get recorded.  Wet-ink note goes to lender.  Everyone gets copies of everything.

If you do anything less for your private lender than is required of you by HML, you are doing your "friend" a disservice.

Are you looking at buy/fix/flip or buy/fix/hold or build/sell or build/hold or ???

My answer varies based on the target.

I draft and review lots of different capital structures.  If you are looking for a flip or sell exit, you could raise a fund to act as your private equity partner.  This *might* work for a hold strategy, but there has to be an exit for investors at some point.  Not many will want to invest into a fund with a 30-year exit strategy.

Basically, you create a PE fund that lends to or partners with your REI company. This should be a completely separate company to minimize chances of blowback from its investors. The PE fund pools money, so you pay syndication costs once but invests in lots of different projects.