All Forum Posts by: Aaron Pfeffer

Home Equity Line of Credit. HELOC. Some HMLs have given loans on primary residences in the form of a HELOC as long as the reason was for a business purpose, which allows them to avoid certain usury laws depending on the state. Which helps answer your question about why not your primary residence...as the restrictions on lenders are more severe. And rightfully so.

As for your other house...

You couldn't otherwise just say...that's really my primary residence so give me a loan on the one I'm living in that I'm not counting as my primary residence any longer. So that won't work. But if your other house (assuming it's an investment property and not just a vacation house) has equity in it as well, then the HML can be made on that home.

And there's the issue. HMLs like myself won't lend on a primary residence. You may find some that do in the form of a HELOC, but I haven't know any that will for quite some time. Wish I could help more...

Is this your primary residence you want the loan on?

I used to use it many years ago when doing realty for clients. It's a great tool that creates easy to read CMAs. It's an MLS offshoot, so every comp is MLS, but it often takes a few days for updating. That's the biggest knock against it.

I've heard of that, but wow that takes a lot of trust between the wholesaler and end buyer, because at some point either one of you will hold title or have the others funds in their possession while waiting on paperwork execution.

More reasonable is that the vestee gets re-assigned mid escrow with the blessing of the seller (not really reasonable).  Or the wholesaler uses a trust and you switch trustees mid escrow, but most wholesalers aren't that adept.

Either of those scenarios I just mentioned aren't likely for a litany of reasons we don't have to explore at the moment.

Really...just don't buy REOs from a wholesaler.  Or be happy with the premium you are paying and the reduced profit you will make on the flip...if you make a profit at all.

Best bet is just be the quickest on the trigger yourself when the REO listing hits the MLS, and start forging good relationships with the agents in your area who seem to get the most REO listings so that they will think of you first.

Are you adding any more value to the property after you purchase it?  Because then yes, it's possible to do less down payment with a private/hard money lender.  Even better, is the property already worth much more than the $330K you are buying it for?  Also a way to put down less than 25% with a private/hard money lender.

Crossing your rental is a good option to work with if there is enough equity available.  Crossing your primary residence will not work for a private/hard money lender.

One of my funds is quickly rolling out nationally, and we are up to 14 states.  Unfortunately Wisconsin is not yet one of them, but Florida just opened up recently.

Second liens should not exceed 65% CLTV, and less than that is truly preferable.

Buy and hold loans are not our strong suit, though I have some private beneficiaries willing to give 5 year notes at most of the deal appeals to them.  However, those deals really are California specific.

Where are you looking to do your deals exactly Mike? I know a fair amount of JV players in California and some who would consider Colorado if the deal was enticing enough. As in...somewhere around a 20% guaranteed annualized ROI

How about 25% down?

As a broker of hard and private mortgages like Jeff, I agree with his assessment...up to a point.  Labeling a second lien as "never safe" is unfair, though yes, of course they come with MUCH more substantial risks than a first.  Still, I've brokered many successful second liens for my beneficiaries on flip properties, and they've been very happy with the result.

However, there are a number of issues with this particular deal, which should lead you to ultimately reconsider:

$60,000 on a $700,000 purchase is in fact a very small estimate unless they are purchasing an REO or Short Sale and buying at a major discount already...so the $60K will end up being simple cosmetic stuff. That does happen (I see it all the time), but almost never from a first time flipper. The experienced developers get those deals. Jeff S already focused on a few of the other issues, but left out one big one every private lender should consider...

...even if you went forward with this deal, you're not getting enough of a return for the risk. Not nearly enough. Second lien holders top out at 65% (maybe 70%) CLTV of AS IS value, and those interest rates are often above 12%. What this borrower is asking of you is not to be their second lien holder...they are really asking you to be their partner on the deal. And as a partner, you should be paid profit participation plus a "pref" interest rate. Simple 12% monthly interest return for your gap financing is quite honestly a slap in your face.

Bottom line...nope.