All Forum Posts by: Joe Davis

Quote from @Alex Sinunu:

I want to start doing private lending with my own money. The goal is to lend relatively close to my home in Los Angeles. Finally, don't want to put all my (lending) eggs in one basket. Are there opportunities to lend around $100K at a time in this area? Do I look to partner with other lenders? Appreciate any guidance. 

Alex

 If you are working with a well-trusted and established lender, and are considering participating in a note - why would you limit yourself to just Cali? Some of these lenders on a partial will be giving you similar returns than if you originated & serviced theses loans personally. You would also have to market for these loans, and handle any defaults as you scale. 

I would suggest finding an established lender that let's you participate - and start with smaller amounts than throwing the whole $100k in one. You can spread this out over multiple notes, and will learn a lot in doing so. 

Quote from @Jennie Berger:

@Jesse LeBlanc & @Joe Davis 

How do you protect your investment with transactional funding? From my research, it seems that the best way is to ensure the end buyer's funds are at title in escrow (with the clear to close) before you approve the release of your funds. I imagine you also ensure the amount you're lending is less than the ARV of the property. Are you researching this yourself or asking your borrower to provide documentation to support this?

It would seem like a promissory note and recorded lien might not be necessary in cases where the transaction funds in the same day. Am I mistaken? 

What percentage of your loans would you estimate for the transactional funding to occur on the same day, at the same title company, where end buyer's funds are in escrow?

I appreciate all your insight!

 1) We make sure backside funds are confirmed at title before we initiate frontside wire.

2) Our agreement that we get the wholesaler to sign essentially would allow us to secure a loan against the property if for whatever reason there was an issue (as never happened).

3) We generally insist that both the A-B and the B-C contract are at the same title company. Not saying it can't be done at two separate title co's but it's a pain.....and I wouldn't recommend it just starting out. 

Quote from @Jennie Berger:

Hi @Joe Davis, thanks so much for your reply! I could have been clearer in my post. :) I'm looking to get into lending to those who need it. Would you be willing to share what you charge for your transactional funding loans? And are they all for same day double closes? Or do you offer this type of funding on a transaction that could potentially take a few days, or even a week or two? 

If it’s going to be more than the one day loan we actually structure it the same as a regular hard money loan.

if it’s a true double close, process is super simple. We charge 1% of the frontside wire fee with no additional Cost. We set a $1k minimum for properties that need less than $100k wire. 

We can turn them around in just a days notice, we’ve actually had wholesalers come to us day of close because an issue popped up with contract verbiage or $ disclosure etc. 

This is an OLD post i am very aware - but we do transactional funding a LOT for wholesalers who have it under a non-assignable contract and intend to resell. Let me know if i can help. 

Hey Jennie, are you getting into it from the position of being able to offer this service to those who need it, or more as in a way to structure your deals?

I ran a large wholesaling company for many years and we only used transactional funding. Now as a lender, we offer it as a service. 

I have always felt using it has many advantages. The verbiage on the contract, concealing your NET, being able to truly purchase with cash..... but most importantly, I am a firm believer that more legislation will come in (Oklahoma, Illinois, NJ) are examples - and assignments will one day be banned, especially for those non-licensed. 

At this point i think the need for transactional funding will explode. 

Most lenders don't seem to like doing them, I on the other hand love them. We help the wholesaler and establish a great connection and in turn they start bringing us deals & borrowers. 

This is possible, but the interest rate is going to look far worse than if she seasons it. Is the duplex currently occupied or is it vacant - is it at market rent? Is the house she owns F&C rented? 

Markets vary for success on market and off market. For example, we cannot find a good deal in Houston on the MLS to save our lives, but in San Antonio there are a bunch. It's market/MLS specific. But one thing is for certain - if it's off-market, you have a much greater probability of getting to the the desired purchase % you are after. There are too many weekend warriors willing to pay a much higher percentage when its on the MLS.

We do DSCR of lower values and have really seen parts of Ohio take off! Not to say we don't love Tennessee too - but a lot of investors right now have been migrating towards Ohio.

You will be looking for an investor who has a lot of experience with sub2 and also deeper pockets. $60k s a substantial amount of cash for anyone to leave into the deal. Just because it's a sub2 with a better interest rate, most investors are looking for a rate of return. With $60k and the fact that your UPB is now $250k they are going to weigh up if it's worth it. If you can get in and out of a BRRRR let's say leaving $10k in the deal.

Obviously not having your name tied to the debt is a plus, but also if you haven't structured these correctly they can come back and bite the investors (due on sale, issues with prior owner of record etc). 

To me the rental spread is great, the OOP is high and the equity is lower than I would want for that type of capital input. If s*** hits the fan, i would want to easily be able to refinance out of it, let's say 70% so needs some equity in it OR i am just having to bring even more cash to the table to get it done. 

Further, don't assume the $50k in arrears get's applied to the UPB. a Large majority of that is fees, trustee costs etc. so even with $50k + your $10k fee - the UPB needle isn't going to shift much. If you had to refinance, your still going to be bringing a lot more cash into the deal.

Lastly - this is a rural and underserved area. I quickly ran it through the tool  most commercial brokers are using (consumer finance). When i saw the population, i thought you would struggle to get it rented quickly if necessary. This is another factor that some of your buyers would consider - not to knock your deal, this is just my insight. I hope you get it sold!!! 

As others have said, programs exist that allow you a DSCR without "typical" seasoning. That generally falls within 90-120 days of ownership. If you need it quicker than that, my question is has work been put into the property? Is it leased? You might take a slight ding on the interest rate, so sometimes it's worth just looking at all the numbers and seeing if it's worth waiting or not. Most HML's are on at least a 6 month balloon so allow you ample time.