All Forum Posts by: Tim Johnson

Hard money / private money lenders, I am interested to hear what kind of problems and headaches you are experiencing in your line of work.

It seems like everyone has a landlord nightmare story, but I'm less familiar with the common problems faced by lenders. Before I dive further into this business, I want to know what kind of troubles and complaints (both big and small) are out there.

So... share your problems and I will politely read and upvote your posts... for FREE! ;)

 Hey Jeff, newbie here just curious, what do you see as the benefits of being able to use a Notice of Non-Renewal instead of the eviction process?

Thanks again all appreciate it!

What are your most important steps and follow-through principles to getting paid when the note matures or debtor wants to pay off early? What boxes do you check off before you finally shake hands and move on to the next one?

Context: I made my first loan in October 2016, $15k from myself to a house flipping couple's LLC to finish renovations on a single family. It is secured with a first lien (they funded initial purchase with a HELOC). They are just about done with the project and looking to sell the property soon.

Rookie question. I'm about to fill my second vacancy and wondering how to get more applicants this time around. I had a bright idea: make it super easy for them to start the application process.

Tenants would apply for free online (thru Cozy) to pass/fail an initial screen for employment, income and references. If they pass that screen, then I would follow up to have them complete a credit and background check (also thru Cozy), which would complete the application process.

Is this a dumb idea? What are your best practices?

Thanks.

@Andrew Nugent With an LLC you'd probably have to go through the commercial lending department at the bank. Typically I think they require a variable rate versus a fixed rate, which would be less attractive to me currently considering that interest rates are likely to continue rising.

I am honestly not too familiar with refi's since I've never done one before. All I can say is... if my hard money debtors approached me today and asked to refinance their note, my first question to them would be: "Refinance as in pay off the note now with money you borrowed from someone else?" In that case, sure. Or... "Refinance as in re-negotiate our agreement for a longer maturity and lower rate?" My response to that would all depend on what they've done with their property since I loaned them money, as well as what my other investment opportunities are at that moment.

@Jordan B. Just curious - you said both units in the duplex are 1br/1ba... so what is so incredibly different about Unit 2 that it would rent for $1075 whereas Unit 1 would only rent for $825? Gold-plated toilets? :)

I had a great experience doing a house-hack for my first duplex property to get my feet wet. It had a rate of 3.875% fixed / 30yrs. If it were not owner occupied, I recall the rate would have been closer to 4.5 - 5%. 

Later that same year I turned around and wrote a private money deal for someone and I'm charging them 12% with a one-year maturity. If the market rate for private money was much lower than that, they would have got their money elsewhere.

All else held equal... if you have the opportunity, personal flexibility, and down payment cash to do a house-hack through a conventional lender, I would leverage those factors in your favor. You will secure yourself a much lower rate for the long-term in a single transaction. Why pay ~12% for hard money for a year or three years, go through the hassle of refinancing to conventional, and ultimately end up with a higher long-term rate after interest rates have risen?

On the house hack: Your rate may vary depending if you are using an LLC (I'm not). Owner-occupancy rules may also vary depending on lender -- but I had to transfer cities for work within a few months of purchase, and the lender had no problems with that. Also -- look into doing an FHA loan. I chose to do 20% down for my conventional loan, but you could perhaps qualify for 3.5% if the deal meets FHA requirements.

Welcome Kingsley! How'd you get into the business and what's your experience been like so far?

I'm a rookie lender myself - wrote my first secured note up in Tulsa, OK in October 2016.