All Forum Posts by: Kristi K.

Wow. You were not only lucky to get your money back, @Kristi K., but also fortunate that your borrower didn’t contest your business-purpose loan as being for a consumer purpose. Verifying the use of the money and confirming in writing that it’s for a business purpose are integral parts of any private loan. This could have cost you your interest at a minimum and perhaps a fortune to defend. It’s doubtful you would have been able to foreclose if the loan had been contested and you lost.

According to all the lending attorneys I know, this is the most popular lawsuit in private lending. Some attorneys now specialize in these. It’s so serious that, beginning January 1st in California, any lender who knowingly originates a consumer-purpose loan misrepresented as a business-purpose loan can face criminal charges and jail time. It has been a civil issue only—until now. Protect yourself.

Our loan documentation package includes several handwritten forms that the borrower must complete at various points during escrow to establish the intended use of the funds. Some lending attorneys now recommend interviewing your borrower in a recorded Zoom call, using scripted questions, to document their intentions.

Your list and communication clause comments, @Jonathan Chan, appear to reflect a do-it-yourself approach. Well-intended, no doubt, but you might consider running some of these ideas past a good lending attorney. My opinion and also writing what I know others are thinking.

Not sure what you mean Jeff. Our lawyer wrote up the loan doc, they borrowed $60,000 to renovate 123 main st, I got first position lien on 123 main st, they paid $500/month interest and the $60,000 lump sum back after 12 months. The paperwork was legitimate, what they used the money for was not.

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Quote from @Jonathan Chan:

If you're interested in adding real estate lends as another tool in your toolbox, these are the steps I've learned you should take to vet your borrower before looking at any of their opportunities!

Background check
Credit check
Past performance. Look at purchase HUDS, statement of work if it was a renovation and the sale HUD to make sure they made money on the deal.
An organized and easy to navigate borrower's package.
Security documents to collateralize the loan against real, tangible property.

I loaned $60K to some “friends from church” for a flip they were doing about 8 years ago. I got a lien on the house they were flipping, all looked good on paper, then I found out they were using my $60K to improve their personal house! I got my money back plus 10% but I’ll never loan money to anyone again.

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Quote from @Jay Hurst:

Yes, I agree, I've looked at a lot of their "deals" over the years and have yet to find one that makes sense but the hunt goes on......

1 Vote

Quote from @Robin Cloud:

Hi. I own a duplex property (I do not live on site) and I'm renting out the 2 bed/1 bath back house. I got three applications today. All of them are financially qualified and sound:

1. Single woman, mid 30s, small dog, 50k in student loans, decent savings, 735 credit

2. Couple, unmarried, two cats, 50k in savings, mid 30s, credit over 780!

3. Young couple, late 20s, only one is steadily working but make 130k, partner would be the occupant, no pets. 705 credit but only because she doesn't have a lot of credit.

Torn between 1 and 2. Thoughts?

#1, I don't like cats in my rentals....

0 Votes

Los Angeles County, California

Quote from @AJ Satcher:

But I want to know if anyone has had any luck with the tax appeals process? And if so, what exactly would you go about appealing? Any other related advice would also be appreciated!

Thanks!

We appeal every year here in central Texas. It's ridiculous what #'s the county throws out there for tax appraisals some times. We appealed 16 properties this year and have gotten 12 results so far with $116,454 reduction in values and 4 more pending the hearing. That equates to $4,286 a year in tax savings. Last year we saved even more because one property got $120,000 knocked off by itself because someone just made up a # to put on it. I'm not sure how it works in Ga though.
Go to a local realtor next time the appeal process is open and ask them to do a CMA on your place and use that data for your evidence when appealing with the county. And don't forget to register your homestead. Best of luck.

1 Vote

Quote from @Joe S.:

I got a “just listed an hour ago” text from a new western agent in San Antonio on Tuesday this week, we jumped in the car because it was only 15 minutes from our house and we were looking around the inside of the house when I got a text from the agent saying that it just sold.

3 Votes

Quote from @Michael Plaks:

Quote from @Sean O'Keefe:

[crawling into my office closet while alternating between sobbing and laughing]

Haha, I had the same problem the other day. Took me a few days to figure it out too.

2 Votes

Quote from @Erik Estrada:

They are technically more expensive than a traditional 30 year fixed.

Let's compare two scenarios I priced out, Borrower Paid Broker Compensation

Purchase Price: $500,000

SFR

30 Year Fixed

Credit 740

DSCR over 1.00

Meets DTI Requirement

1. DSCR

No PPP

Rate: 8.75%

PAR

30 Years Fixed

2. Conventional, UWM

Rate: 8.00%

Lender Credit: $620

30 Years Fixed

You have to consider that a conventional loan does not have a Prepayment Penalty. The added Prepayment Penalty, makes the loan technically more expensive than a traditional conventional refinance if you decide to refinance in 1-5 years.

BUT,

If you do not plan on refinancing your loan in 1-5 years, then you could get better pricing on a DSCR loan.

Same scenario, with a 5,5,5,5,5 PPP structure

Rate: 7.25%

PAR

30 Years Fixed

I just closed on a DSCR loan at 5.7% last week. 7.25% is insane…

0 Votes

Louisville, Kentucky

Quote from @Lauren Kormylo:

Yeah, no way am I paying Vrbo 10% for bookings elsewhere. Especially when they only charge me 8% for bookings through them. Where does it say this in their terms of service? If it's not in there, they can't charge it.

How are you only getting 8% VRBO charges? Our average for almost 1.5 years is about 18%.

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This is the best quote I’ve seen in a long time. My brother in law told me a few years ago that I was the luckiest sob he had ever known but it took me 33 years of living below my means and working hard to buy enough rentals to retire with the same standard of living that we were used to.

2 Votes

All Forum Posts by: Kristi K.

Kristi K. has started 16 posts and replied 365 times.

Post: Thinking of becoming a private money lender? Vet your borrower properly!!

Post: Thinking of becoming a private money lender? Vet your borrower properly!!

Post: Off market deals! It’s easy find yourself some off market deals!

Post: Three Applications...who to choose??

Post: Taxes Doubled On Property - Has Anyone Gone Trough the Appeals Process?

Post: Off market deals! It’s easy find yourself some off market deals!

Post: REPS And Active Losses and Gains

Post: DSCR loans are cheaper than a traditional 30 year fixed right now.

Post: VRBO charges 10% commission for direct booking outside of their platform

Post: Is it really this bad with syndicators?