All Forum Posts by: Sean Yang

@Kevin Martin The expected return was around 15%-30% depending on when the project was finished. It's not a stunning deal but I thought it was okay because this borrower has a good track-record and I've done one deal with him in the past. But believe or not, I have heard many 2nd loans here have an ROI of 15% or less. So apparently some people are willing to take the risk for this kind of return.

@Michael G. Ya I agree with you. However, this is not my first real estate deal with this person- I have done another deal with him before and that one went well. That's prob why I didn't pay enough attention to the details, which is a big lesson for sure. This borrower has successfully flipped 45 houses in the past 2 years and who would think they'd screw up on this one... So my advice for other investors here: always do a full due-diligence and if something doesn't smell right, walk away!

@Charles Kao Thank you for the input. I am currently working with an attorney and he is drafting a demand letter and will also do an asset search of the borrower. But other than that, I don't see how it will change the whole picture- if the borrower has no capital to pay or continue the job, he still won't even pressured by a lawyer... My attorney also suggested doing a pre-judgement writ of attachment on his personal asset if there is any and he's working on that. 

I came to BP for help not because I wanted to go cheap. I simply value the information here as I believe many folks here may have similar experiences, which might be more valuable than an attorney from the investor perspective. After all, an attorney is trying to make profit (they charge by hours here in CA) and often times they are not 100% in line with the client's interest as I feel.. But again thank you for your input

@Jon Holdman

The $540k does not include the $295k construction budget. The 1st loan was actually $484k, and he had drawn $56k from the construction budget, which is how I got to the $540 (484+56). So there is still $295-$56= 239k left in the construction budget as far as I know. 

@Jay Hinrichs No, the company I was referring to is just a general debt collector, who does email/mails/calls to collect debt if I provide them the documents to back up my claim (in this case I have promissory note, deed of trust, and a personal guaranty). My understanding is they will pressure on the borrower and maybe work with him to setup a payment plan. With the personal guaranty signed by the borrower, I am entitled to go after this personal asset if there is any, correct? 

@Jay Hinrichs

Yea there is a construction hold back of around $295k by the first lender I think (but the borrower told me the real cost is going to be around $350-$400k). But does it help if I also hand it to the debt collection company? 

The borrower has completely demolished the house so basically it's going to a be a new construction... I don't think I can personally handle a project like this. The numbers are as following: 

1st loan balance ~540k

2nd loan $180k 

construction budget: $400k

Total cost: 1.1M-1.15M

ARV: 1.4M

@Jon Holdman @Jay Hinrichs @Jeff S.

Thank you all for the advice and they really helped me get a better grip of this deal. I am trying to work with the borrower through a deed-in-lieu to another flipper but the numbers don't look great, so even if it works I may have to take a hair cut. The borrower is also trying to get a refi but not sure if he will be qualified since he's late on payment for the previous loan. This guy has a good track record and has flipped 45 homes in the last two years, so I doubt he's willing to give up everything over a couple of unsuccessful deals. 

On the other hand, my friend recommended me some debt collection company. Does any of you have experience with such service? They claim they don't charge anything unless debt is collected and their fee is quite reasonable at 15%. If they fail, they have an in-house law firm which will handle the case at the same rate. If that still isn't successful, they will hand over to litigation/lawsuits who charges about 30% only if debt is collected. They claim they have a 85% success rate which is quite impressive. Is there any drawback if I hand this over to a debt collector now? 

@Jay Hinrichs

Thank you for your detailed response and it's very helpful! So lets say the 1st loan is $500k and 2nd loan is $200k. So as long as it's foreclosed for above $700k, we are still above water?  In terms of the broker, he is a licensed real estate broker last time I checked. Does that allow him to broker loans in CA? 

Also, is the broker off the hook?