All Forum Posts by: Joffrey Long

Thanks, EVERYONE, for your great responses. This is the most lively thread I've ever done on BP, so it's a great exchange.

David, Thanks for your post. You're right, and I'm glad you brought that up. What I said about Section 35 and 32 is only correct based on TODAY'S rates, and you are right in clarifying that sometimes, (in a very different interest market than today) a loan could have an interest high enough to be usurious, but still be lower than the threshholds for 32 and 35.

Thanks again David, and Everyone! Keep em coming!

Joffrey Long

That's very generous of you, K. Marie. As you know, the most important thing we ever learn is how much we don't know. I have a lot more to learn than what I know!!!!

Thanks again.
Joffrey

Rick,

Thanks again for posting.

Here are a few clarifications, based on my understanding:

Non-owner occupied deals are not exempt from Usury. Non-owner occupied transactions are exempt from some laws, but Usury would apply to most real estate loans and the application of usury is not determined by occupancy or type of property.

That would also answer your question about my concerns about loaning to a non-owner occ borrower, (1-4 or any property). Their living or not living in the property does not impact the application of usury.

Where you indicated that you're not required to provide the Reg Z dislcosure on a non-owner occupied loan, that's not completely correct. Reg Z applies to any CONSUMER transaction, and is determined by the PURPOSE of the loan, owner or non-owner occupied. The general assumption is that non-owner occupied loans are not for consumer purposes, but not always true. We close non-owner occupied loans sometimes and treat them as REG Z loans, due to funds from the non-owner loan being used to buy out a spouse, send a child to college, or purchase a residence.

Just keep in mind that the application of REG Z falls to purpose, not property type or occupancy.

With respect to your statement about the 10% threshhold, as it relates to section 32 and section 35, it does not. They are separate standards.

Section 32 and 35 do impact owner-occupied loans and as you know, cause additional requirements and liabilities to kick in when you exceed certain interest rate limits, all FAR below the usury limitations.

Rick, you and I will be meeting soon at the event we're attending in February, and we'll learn more about all this at that event. Look forward to seeing you there. :)

Thanks for a great set of questions.

Joffrey Long
P.S. Anyone reading this should know that I'm not an attorney and am only a lender/loan broker and not qualified to advise on all this. Check with qualified counsel on this. Also, nothing I say should be considered applicable to any existing legal matters.

K. Marie,

Thank you for your post, K. Marie,

Appreciate your feedback. Truth is, a lot of hard money guys and gals loan at well above 10%, so you're correct in many cases.

Due to the low (or non-existent) yields on everything else, and due to our push to get more conservative, passive, lower-return type investors, and MAINLY due to competition, we've lowered our rates over the past couple of years. Last deal closed was 368,000 loan on a 12-unit apt. building at an APR of 9.2%. Interest rate was 8.5% and we did a no-point loan and we PAID all the borrower's escrow and title costs. We added a prepayment penalty, so we're very happy to be getting 8.5% on a good loan in today's market.

37 years of trust deed investing have taught me that decades of getting lower real estate returns and actually getting them is way better than shooting for high returns and losing money. (The math works out much better.)

Regarding the case law site, would be glad to learn more about it. I'm a nerd myself, and I can relate to reading case law for fun. Got ahold of some very interesting usury cases recently for a case I'm testifying on, and it's interesting how decisions are made and what the courts consider.

I am the Education Chair for the California Mortgage Association, the statewide hard money lenders trade association, so I guess I'm a C.S.N. (Certified Super-Nerd)

Thanks so much for your post, and look forward to future feedback, questions and comments from you.

Joffrey Long

Bill G.,

Thanks for your further response to Will's question. I think you laid out the answer in a more thorough and complete manner than I - particularly the question you posed, "what is origination?"

Thanks! Stay warm over there!

Joffrey Long

Will,

Thanks for your reply to my thread. Great question that you asked - It would seem pretty obvious that if a real estate broker made or arranged the loan, the code section would spell out a possible exemption.

Logically, who needs an expert for that?

Here's the answer: Some loans are clearly made or arranged by a broker. For example, in my business I make loans. My company, (by the way, we're right down the 5 Freeway from you in Granada Hills) which is named Southwest Bancorp, is a licensed real estate broker and it makes the loan with its own funds. Real clear - exempt as made by a broker. Then, sometimes we arrange loans using the funds of another. We process the loan, give disclosures and again, it's clear the loan is arranged by a broker.

But there are many cases where there may have been a broker involved, parts of what a broker does wasn't done, or in some cases, there are marginal claims that "oh - yeah, Bill was the broker." (and Bill was no where to be found.)

So in those cases, one of the Usury Expert Witness candidates are called in to testify - and hopefully assist the triers of fact in resolving the matter.

We're neighbors - practically. Would be great to be in contact and see if we can share ideas or help each other. Let's be in contact.

Really appreciate your taking the time to comment on my thread,

Joffrey Long
P.S. I should state here that nothing I said represents an opinion about, or relates in any way to any particular case, or any matter previously, now or anticipated to appear in any arbitration, court proceeding, mediation, or other legal proceeding.

This post relates primarily to California:

Hard money loans are often made at rates that exceed usury interest limitations. On hard money loans, California trust deeds can be exempt from usury interest limitations under certain conditions.

I'm looking for feedback from anyone else who has seen cases involving claims of usurious real estate loans, or loans with (claims that) interest rates that exceeded the maximum interest rates under usury.

Of particular interest to me are cases where a lender or broker claimed a specific exemption from usury limitations, or cases where testimony from a "usury expert witness" or other type of mortgage lending expert witness was considered. Often, under section 1916.1 of the civil code, an exemption from usury is claimed for real estate loans made or arranged by a broker.

In my business as a hard money lender, my interest rates are generally below usury levels, but as a mortgage expert witness, I see many cases that exceed the usury interest limitations, and then for some reason or another, have turned into cases of mortgage litigation related to usury.

This is a very specific area, so references to cases specifically involving claims of usury would be most helpful.

Thanks, in advance, for any information you're able to share.

Joffrey Long

Brandon,

I'll qualify this with the fact that there may be MANY correct answers for this. Here's the one that has developed over the decades for me:

On deciding how nice to make a rental in preparing it for rent, I have two primary areas I consider:

1) What kind of return will I get from the improvements I'm considering?

For this, I have to compare my condition or projected condition to competing rentals, how long an improvement will last, (Granite counter-tops versus an upgraded toilet paper holder) the trends in the market place, such as what tenants appear to be trending toward liking, how popular a particular item is, and wether I might get only the same rent as I would have, but possibly just get a better tenant.

Those are all bottom-line, figuring out the net dollars concerns.

2) How much time and aggravation it saves me:

Here, I go beyond just how many net dollars in extra rent I'll collect, versus the cost of improving, and I consider how much extra time it takes me to wait another week to rent it, or possibly how much time I waste dealing with a "b" quality tenant, when for an extra $1,000 worth of upgrades, I might have attracted an "a." (I make decent $ in my regular business, so more time saved can be converted into $$, when I'm not busy posting on BP.)

Also, (and this is maybe part of point 1) I consider how much more quickly I'll get it rented. Obviously, if the rent is $2,000 per month (remember, I'm in Southern California) and I rent it 15 days earlier, $1,000 that I spent is more than recovered since I don't have to pay the light bill on a vacant place, or incur more cost of marketing a vacancy.

Another item I've been running into lately is thinking way ahead, and wondering when the tenant gives their notice to terminate the tenancy, how will the unit or house look if I'm going to show it to prospects while they're still there? (which I often do) I LOVE to get those "back-to-back" rentals, where tenant A moves out on the 4th, and we're fixing up fast and tenant B moves in on the 10th. That's almost as exciting as as, well..........it's not that exciting, but I sure like it!

So if the unit is fixed up better, then when I do go to show it to new prospects, I'm more likely to get one of my quick turnarounds.

Brandon, was this what you were looking for? Hope this helped!

Joffrey Long

I'm learning the whole search engine thing too, but there are a lot of good books out there on search, and that might help. Jon is right, how you structure the content, links, photos, etc. are important.
Also, for your domain name, a lot of people choose ones that are easy to remember, easy to put on printed material, and maybe have an action phrase built in. (findOCofficespace.com)

I recommend getting all the similar domain names as well, not to use them, but to forward them all to the main one. So if you get OrangeCountyOfficeSpace.com, ALSO reserve OCofficespace.com and Orange-county-office-space, etc. You would be surprised how many people enter mistakes when they attempt to enter your URL - and you don't want a competetor setting up a competing site with a very similar name.

You now know everything I know about SEO. Hope you found value.

Joffrey Long

Philip,

Welcome to real estate investing. You'll get a lot of good ideas here, just watch the various threads.

But also, you might join local real estate groups. I will say that at local real estate groups, not everyone talking about "all the deals they do" is actually doing any deals - so you just have to be careful of who you are listening to.

Also, if you ask five different, successful real estate investors, they will tell you five different ways you should invest. All of them are correct, but only one of the methods might work for your way of thinking, way of doing business, etc.

Bottom line: I've learned a lot from good mentors. It takes a little time and effort to find them. Hopefully you're good at nurturing mentor relationships. You've obviously had past success in business already, so this (mentors) is probably not new information to you.

Also, I do recommend having a fairly well-defined (but yet flexible) overall plan/strategy as to where you're going with investments. My biggest mistake was for the first 15 years I didn't follow a focused plan, and wasted a lot of time "gunslinging" or investing here and there without a plan. (I'm a very slow learner, so that's why it took me 15 years to figure it out.)

Hope this helps.

Joffrey Long