Two Plus Two Newer Archives  

Go Back   Two Plus Two Newer Archives > Other Topics > Business, Finance, and Investing

Reply
 
Thread Tools Display Modes
  #11  
Old 11-07-2007, 03:06 PM
phiphika1453 phiphika1453 is offline
Senior Member
 
Join Date: Oct 2005
Location: inyahead
Posts: 878
Default Re: Hard Money Lending

[ QUOTE ]
Phi,

Have you asked him whether or not you need to indicate that you and your wife are owner occupants for the HELOC?

J

[/ QUOTE ]

I have not, but I will.

What does the owner/occupant status do in terms of the HELOC? or any other part of the deal?
Reply With Quote
  #12  
Old 11-07-2007, 03:10 PM
phiphika1453 phiphika1453 is offline
Senior Member
 
Join Date: Oct 2005
Location: inyahead
Posts: 878
Default Re: Hard Money Lending

[ QUOTE ]
I think he's trying to use you as a risk shield if something goes wrong and it becomes hard to resell the house you bear the costs.


[/ QUOTE ]

This is my thinking also. Am I wrong in my thinking that getting him to cover the carry cost will reduce my risk in the deal?

[ QUOTE ]

In short if the boss was sure this was guaranteed profits he wouldn't be looking for a partner


[/ QUOTE ]

I have said this exact same sentence to myself 1000's of times.
Reply With Quote
  #13  
Old 11-07-2007, 03:17 PM
jaydub jaydub is offline
Senior Member
 
Join Date: Dec 2004
Posts: 2,055
Default Re: Hard Money Lending

[ QUOTE ]
[ QUOTE ]
Phi,

Have you asked him whether or not you need to indicate that you and your wife are owner occupants for the HELOC?

J

[/ QUOTE ]

I have not, but I will.

What does the owner/occupant status do in terms of the HELOC? or any other part of the deal?

[/ QUOTE ]

Changes the willingness of the lender to participate because historically default rates are far lower for owner occupied properties. Misrepresenting this status is one of the more common ways to defraud a lender.

J
Reply With Quote
  #14  
Old 11-07-2007, 03:31 PM
spex x spex x is offline
Senior Member
 
Join Date: Jun 2005
Location: who dares wins
Posts: 569
Default Re: Hard Money Lending

I agree with the other posters here. Something about this scenario seems fishy. Traditionally in hard money lender, the investor finds the deals, does the fix up, sells the property. The HML only sits back and collects money. So I can't imagine why this guy would want to find, buy, and fix the property, but give someone else half of the upside? What does he get out of bringing you guys into the deal?

One thing that occurs to me is that maybe his plan is to buy the property, write you a mortgage, but conceal the mortgage when you go to get the HELOC. Honestly, I doubt that you'll get any bank to work with you on a HELOC when there is a hard money loan out on the property. Who is going to want to get in line behine a HML? I can't imagine that the HELOC will fly unless the HML is concealed. That, of course, is mortgage fraud, so be careful.

The world of serious RE investing is pretty small. I can't imagine that an established investor would throw out a hard-won reputation over a few $50k deals. But who knows?

Honestly, I think that you should meet with the guy and have him give you a written proposal. He needs to clearly spell out how the deal will work. Ask him very directly why he needs you at all to put deals together. It seems odd to me that an established guy would want to partner with some newbies that aren't experienced. If these deals are so good, he could pretty easily find another established investor to work with.

In sum, I think that you should hear the guy out. Probably it'd be worth it to join the local REI club and start asking people about his reputation. Also you could find an objective party to look at the deal and offer advice.
Reply With Quote
  #15  
Old 11-07-2007, 03:51 PM
SteveOMS SteveOMS is offline
Member
 
Join Date: Jun 2005
Posts: 64
Default Re: Hard Money Lending


>>>>>>>>>>>>&g t;
This is my thinking also. Am I wrong in my thinking that getting him to cover the carry cost will reduce my risk in the deal?
>>>>>>>>>>>>&g t;

Not really, at the end of the day the title is in your name and the risk on resale value is yours. And this is one of the largest expenses and this is why he brought you into the deal I think to cover carry costs. He he pays the costs then what do you bring to the table? Just a name on the title? Makes no sense. I doubt this guy is really looking to steal money from you, just lay off the high risk involved and dont see why you would risk your credit and savings for such a small potential gain in a tough real estate market

As a general note I have no problems with hard money lending and myself took out a hard money private loan on my last real estate investment. But be watchful of the fees and costs involved. My deal was a market rate deal. Too many people are swayed as amatures into the real estate market and look to get in at any cost possible, which obviously makes no sense when it comes to profit margins and why there are tons of foreclosures out there now.

Steve
Reply With Quote
  #16  
Old 11-09-2007, 09:39 PM
GittyUP GittyUP is offline
Senior Member
 
Join Date: Dec 2006
Posts: 320
Default Re: Hard Money Lending

It sounds like this guy has no available cash to make the deal happen and wants you to finance the deal and carry the risk if the deal goes bad. Basically he is offering the service of finding the deal (moderately hard if no experience), doing the rehab (not very hard to find a reliable contractor), and then reselling (hire a realtor).

He isn't really asking you to do a hard money loan. This is a lender who offers a short term bridge loan at high interest. (Which is very desirable type of loan in many RE transactions).

EDIT: OK im actually very confused after looking over the post again.

So the hard money loan from your wifes boss is what will be used to purchase the property initially? Is this what you meant by "he will purchase the property cash."

If this is correct then my initial assumption is correct in that he needs your credit and/or access to hard money (it being you wife's boss) to make this deal work.

Also i wasn't aware that BOA has a non seasoning policy. even if they there wouldn't be much equity until the repairs were complete. I thought HSBC had the best with a two month seaonsing.
Reply With Quote
  #17  
Old 11-10-2007, 12:30 PM
SossMan SossMan is offline
Senior Member
 
Join Date: Apr 2003
Location: Motorboatin\' Sonofabitch
Posts: 7,827
Default Re: Hard Money Lending

he's going to buy the home cash.
you are going to take out a heloc
he uses the heloc funds to repair the property and increase value.
sell/rent or L/O the property
split profits.

am I missing something, because I don't see a HML in that equation. is he lending to the future buyer? why would they need hard money?

the other thing is that he's controlling the 'costs' of repair.

let's say you pick up the property for $200k.
You take a 50k heloc out.
How much you want to bet that the whole 50k gets used in the remodel, one way or another?
Reply With Quote
  #18  
Old 11-10-2007, 01:32 PM
Guest
 
Posts: n/a
Default Post deleted by Mat Sklansky

Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -4. The time now is 02:57 PM.


Powered by vBulletin® Version 3.8.11
Copyright ©2000 - 2024, vBulletin Solutions Inc.