All Forum Posts by: Joffrey Long

Amir,

Love your comment, "lower my rate for professional / reliable borrower/rehabber." I've had to lower my rates even for irresponsible and unreliable borrowers!

My "how low can you go, Joffrey?" is my apartment hard money first at 7.499%, no points, no fees, and we pay borrower's title, escrow, recording, notary fees and lunch the day of doc signing! .......and happy to do it!

I have to share the greatest line I ever heard to convince investors who need to be trained to accept rates that are realistic, it's from my friend Ron Bedell, who said, "Bernie Madoff taught us we can't get 12%."

I fund about 100% of the hard money loans I do w/ my own money - about 40% of them are "saleable" quality - andare sold to inestors, the other 60% are "not saleable or not suitable" for my private investors and they are the higher risk / higher yield loans I keep. Highest rate I ever get, even on a risky deal that only I would take is about 9.9

Joff

I'm not going to offer an opinion (here, today) as to what is or is not predatory.

However, I will offer one very strong opinion:

Predatory is spelled, " p r e d a t o r y ."

There's no i

Joffrey Long

Back to David C. 's original post:

Investors often sue anyway when they lose money - it's simply no fun. SB 978, obviously, could give them another avenue under which to attack the provider of the investments.

With respect to the supply of private money dwindling - afraid not. There are plenty of investors out there who are "suitable" for these investments.

K. Marie Poe

You indicated that it appears that most of SB 978 is aimed at securities offerings. You're right.

However, there are almost no exemptions.

All trust deeds offered to private investors, whole loans, or fractional interests in loans, are "securities" in the eyes of the law. It can all be found in 10238 of the Business and Professions code, available online.

So, to avoid registration of the "securities," you can sell or offer the securities to private investors and take advantages of the exemptions from registering the securities - but they're still securities.

The procedures for getting the exemption are no big secret - all available for free in 10238 of B and P.

And a single first trust deed is not exempt.

All that said, it's not an impossible law to comply with. Actually, those of us who operate under the real estate broker license ALREADY had an obligation to look at suitability, it just wasn't as clearly spelled out.

It also brought those who broker and solicit investors for single loans under many of the same rules that only those who offered "fractionalized" or multi-lender loans were under before.

Aaron Norris Great observations - thanks for pointing out the questionnaire, that's something everyone needs to be aware of.

(Available for you to view at www.dre.ca.gov Click on FORMS, then on Mortgage Lending Brokers.)

I consider the law an advantage in many ways. It forced some of the "whole loan" arrangers to comply with laws I already had to comply with, (I often do multi-lender loans.) it raises the bar on requirements, so fewer people can do this, (legally) and it lays the foundation for better protection for investors, which then makes more dollars available for investment, provided the dollars are invested through someone who follows the law.

And for all the laws we have to follow in hard money lending, all I can say is, I sure wish they were all as feasible as this one is to comply with. Whew! That would be nice.

Joffrey Long

P.S. Nobody rely on this, ok? Check with competent counsel (attorneys) who really know what they're doing. This is just to give you ideas and questions to ask the smart people about.

Yes, thanks for the feedback.

Sadly, as with many laws, they did not check with me before writing these disclosure / lending laws.

(That's meant as a joke, by the way.)

Joff

Amir,

Thank you for your kind words.

Joffrey

Wow!

This is a great topic. I hope you don't mind if I dredge up something that happened way back in the last century, but it left a lasting impression on me and you might have a different take on it.

One of the first HUGE mistakes I made was back so long ago, people didn't even have cell phones. But they did live in apartments - here's what happened:

We were operating a number of smaller (10 to 30 unit) bread and butter apartment buildings and we were cranking up rents as the local (Southern Calif.) economy was booming.

Then came RENT CONTROL. We could no longer raise our rents more than 3% per year.

We did EXACTLY opposite of what would have been the right reaction. Rent control? We want out. We sold everything and went elsewhere.

The guy who bought several of our buildings got rich.

Why? The rent control (and this is similar to tenant unions, etc.) if it's not too horrible a rent control law, (like the one in West Hollywood CA where it's basically the tenants that own the building) served to push out the speculators, and enabled true investors (like smart George, who bought our buildings) to get good returns.

Just like what happened in our mortgage business, a law that passed drove out a lot of goofy competitors and made the rest of the business better.

So, where I'm not a big fan of governmental regulation or the big world of consumer rights, I will say that sometimes when I see a highly regulated or "swampy" environment, I see opportunity. If you can "play the game" and work with the system, sometimes there's profit there. Also, as a smaller operator, you can sometimes more easily function in those environments.

Joffrey Long

P.S. Los Angeles' rent stabilization ordinance was passed in 1978.

Again, check this out with qualified counsel, but purely to provoke thought and questions on your part:

RESPA, the law that mandates the whole GFE procedures, applies to "consumer loans secured by 1-4 family residences."

A business loan is not a consumer loan.

Also, a loan to a business entity, by it's nature, can't be a consumer loan, since consumer loans can only be made to consumers.

So in my book, your described loan transaction "fails" to need a GFE for not one, but two reasons.

Again, check with those who are truly qualified to answer this.

Joffrey

1) If you refinanced and told the lender you were going to occupy it as your primary residence, and you aren't really going to occupy it (for the long term, not just for 6 weeks), then it's owner occupancy fraud.

2) With respect to renting different rooms to different people, here's a twist you should consider: What about insurance? What about liability coverage on your insurance?

Are you covered for regular LANDLORD rental to regular (one household, one family, one couple, one person) type tenants only, or are you also covered or operating a "rooming house?" -which is what you're doing - if you rent different rooms to different folk.

Problem (and this gets ugly here): Tenant in room # 3 comes home drunk and beats up or rapes tenant in room # 4.

Tenant in room # 4 (or worse, their estate...ouch) sues you for failure to provide adequate security and failure to properly screen other tenants, etc., etc. Big lawsuit. Real big. Bigger than all the extra rent you could collect in 131 years.

So, you go to your insurance carrier and seek coverage.

Do they cover you?

Jon K already alluded to some of this, but I'm spelling it out a little differently.

Sorry to get ugly here, but having been sued by tenants who got hurt (not in that way, thank goodness) I'm a little leary.

That's what years and years of being a landlord will do to you. Take the cheap and easy short cut and check these things out in advance, you don't have to learn the hard way as I did on many things.

Joffrey Long

Having once been stung by a Fair Housing complaint, I feel that every application, and my relationship with the applicant is important to me, for one of two reasons:

1) They are either the person I will rent to (important)

OR

2) They are potential complaint filer for some type of discrimination claim. (wrong or right, anyone can file - and you have to deal with it)

AND (ok, really 3 reasons)

3) You NEVER know who that applicant may turn out to be, now, later or sometime down the line. I live in the greater Los Angeles area with over 8,000,000 (who have been counted) people.

You never know who will call again a year later, when their circumstances have changed and you need a tenant, or who might be impressed with how you treated them and when their friend (who is really qualified) asks them, they give you a good word. I just love to take an extra few minutes and give these poor guys and gals a courtesy call. Guess if I get too important and too busy to do that, it's no good.

So, I personally call all "rejects" and usually tell them that I had several good applications, and had to decide on one of them.

I also don't collect money up front, as I prefer to weed through things a little before taking money from people.

Ok, that's one salty old (37 years of rentals) landlord's opinion. That and $1.95 will get you a grande coffee at S-bucks. mmmmm

Joffrey Long