All Forum Posts by: Luc M.

Jeff,

The broker and I sat down regarding what I would like to see a couple of weeks before this prospect came up. I also told him that my minimum rate would be 12%+2-3pts. He sent this request along anyway. I posted it here to get people's thoughts as I'm sure rate could be negotiated. This broker tried to trick me into a resi loan when I said that I would only do commercial loans. He even said that I should only do commercial loans when we first met. So I think the real lesson is trust nobody and verify everything - a rule that has served me well in my other endeavors.

Guys,

Thanks for all the replies. I am NOT doing this loan. I took a drive by the "house" to see if it would be worth doing the additional due diligence and I decided against it. The house sits on a very hilly street and the site itself is a big hill, leaving whatever residence would occuply it with no useable outdoor space, not even a driveway for a car. Not ideal for a family and not very suitable for a second home (it does overlook a little lake though). Anyway, I called the broker who shot over this request and asked him some additional questions - why would an accountant undertake a BIG rehab project like this for his first project, does he have a GC that is going to do the work, etc., etc. Well, it turns out that the home was going to be for the guys fiance - thus the low 9% + 2 pts (CT usury laws state 12% is max for a residential loan). I told the broker I was not pleased by this tactic and that I wasn't interested in making residential loans.

Guess the lesson is to always watch your back and if something doesn't smell right it probably isn't. Thanks again guys.

So my first oppportunity to make a HML fell through as the buyer lost the house to a higher bidder at the last moment. Here is another loan request I received:

Amount of Loan: $100k
Buyer Cash-in: $38k
Property Purchase Price: $65k
Renovation Costs: $70k
Estimated ARV: $178k (Desktop Analysis from local RE agency)
Property: 1,750 sq/ft SFH in lakeside community in CT (4 bdrm, 2bth)
Credit Score for Borrower: mid 600s
NO Personal Guarantee
Exit Strategy: Sell house or Refi - DU Underwriting Findings - Recommended/Eligible

Borrower is an accountant. Don't know if this is his first project - I obviously will ask about this.

Broker is asking for 9%/2% and the no guarantee.

Would you guys do this loan and if so, at what price (9%/2% seems rather low and no guarantee seems out of the question to me)?

Thanks!

I think what he may have meant is that for every $1 of SPENDING we are borrowing 40 cents (I think it is 37 cents). Social Security, Medicare and Defense spending alone leaves us with another 5% of revenues that can go towards discretionary items. Thus the need to borrow massively.

Said another way, for every $1 in REVENUE that comes into the government, we have to borrow an additional 58 cents to support all the spending. HOW CRAZY IS THAT?!!

Mow a yard, get the land for free:

Mow Yard, Get Land?

What do you guys think of this? Town must be strapped in order to "give" land away.

Richard,

Noobie here in CT. Would love to talk to you also about what you are seeing.

I assume you will then need to rent something to live in yourself no? If so, I imagine the NET rent will impact your debt/income ratio (either positively if you are renting a place to live for less than you are renting your house or vice versa). However, I am not a banker so take that for what it is worth.

I couldn't find them under the "Find Bank" function on the FDIC website:

FDIC Find Bank?

George,

As a novice RE investor, I was wondering where you found your best buildings? Through a broker, friend, lawyer, REO, etc., etc.? Thanks!

George,

How about something more current? Like the tech bubble of the late 90s or how about the real estate bubble of 2005-2008? Sure, gold has gone up a lot in the recent couple years, but since 1980 gold has increased by 186% while the S&P 500 has increased by 1,109%. Since 1990, they are up about the same.

I think I may sell when the politicians come up with a credible plan to tackle the deficit and entitlement spending. Until then, I hold on.