2nd Lien Private Lending Collateralized by Cash flowing Investment Real Estate

Investor · New York, NY · Member since 2017 · 263 posts · 118 votes

Hi all.

I am looking for a 2nd lien private lender to pull equity out of investment real estate properties.

Low LTV for the 1st lien position at 35-60%. Looking for Mortgage and Note lending, with cost effective title search, that does not require complete title work expenditures (comparable to HELOC).

Real estate is already owned and solid cash flowing, and will serve as collateral for the loan.

High 700s credit score. Experienced investor background. Looking to pay ~12% interest for a collateralized loan as above, 1-3 years interest only term. Looking for private lenders only, no conventional, commercial, asset backed or other institutional lending.

Would you have a referral for the above?

Thank you in advance,

Stefan

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

why would you try to save pennies on title insurance that seems very weird..

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Ko KashiwagiPro Member
Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
2y
Hi Stefan,
What is it worth and how much is the 1st lien? 35-60% is wide range, but if it's closer to 35%, I know a private that can help out for 12 months interest only. Happy to connect.
310-848-9776
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Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Account Closed:

Quote from @Stefan Tsvetkov:

Hi all.

I am looking for a 2nd lien private lender to pull equity out of investment real estate properties.

Low LTV for the 1st lien position at 35-60%. Looking for Mortgage and Note lending, with cost effective title search, that does not require complete title work expenditures (comparable to HELOC).

Real estate is already owned and solid cash flowing, and will serve as collateral for the loan.

High 700s credit score. Experienced investor background. Looking to pay ~12% interest for a collateralized loan as above, 1-3 years interest only term. Looking for private lenders only, no conventional, commercial, asset backed or other institutional lending.

Would you have a referral for the above?

Thank you in advance,
Stefan

Hello, let’s connect I have a lender recommendation that can fund this deal
Great! Thanks, Anthony. Just sent you a DM.
0 Reply
Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Ko Kashiwagi:

Hi Stefan,
What is it worth and how much is the 1st lien? 35-60% is wide range, but if it's closer to 35%, I know a private that can help out for 12 months interest only. Happy to connect.

Sounds great! Yes, at least 1 of the properties is at 35% LTV.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
why would you try to save pennies on title insurance that seems very weird..
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Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
We can do the same title work that HELOC lenders complete, totally open to that. Spending ~$5-8k per property on a full refinance type of title work, not worth economically for 2nd lien, smaller equity pull outs ($50-150k per property).
I would complete a full refinance of the 1st lien instead, in case of the above.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Stefan Tsvetkov:

We can do the same title work that HELOC lenders complete, totally open to that. Spending ~$5-8k per property on a full refinance type of title work, not worth economically for 2nd lien, smaller equity pull outs ($50-150k per property).
I would complete a full refinance of the 1st lien instead, in case of the above.

I guess we are not talking about the same thing title and escrow is no more than 1k.. and most lenders are going to want an Alta policy but who knows maybe someone who does not have expereince .. or maybe new York is just crazy when it comes to closing cost since you have to use attornies.. but title insurance does not vary much from state to state.. So guess I am not really understanding what your talking about.. good luck..
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Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Jay Hinrichs:

Quote from @Stefan Tsvetkov:

We can do the same title work that HELOC lenders complete, totally open to that. Spending ~$5-8k per property on a full refinance type of title work, not worth economically for 2nd lien, smaller equity pull outs ($50-150k per property).
I would complete a full refinance of the 1st lien instead, in case of the above.

I guess we are not talking about the same thing title and escrow is no more than 1k.. and most lenders are going to want an Alta policy but who knows maybe someone who does not have expereince .. or maybe new York is just crazy when it comes to closing cost since you have to use attornies.. but title insurance does not vary much from state to state.. So guess I am not really understanding what your talking about.. good luck..

Thanks! To confirm, does your firm do 2nd lien lending, assuming title costs are not too high indeed? If you guys do 2nd lien lending, I think we should connect. And what would be the maximum LTV?
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Stefan Tsvetkov:

Quote from @Jay Hinrichs:

Quote from @Stefan Tsvetkov:

We can do the same title work that HELOC lenders complete, totally open to that. Spending ~$5-8k per property on a full refinance type of title work, not worth economically for 2nd lien, smaller equity pull outs ($50-150k per property).
I would complete a full refinance of the 1st lien instead, in case of the above.

I guess we are not talking about the same thing title and escrow is no more than 1k.. and most lenders are going to want an Alta policy but who knows maybe someone who does not have expereince .. or maybe new York is just crazy when it comes to closing cost since you have to use attornies.. but title insurance does not vary much from state to state.. So guess I am not really understanding what your talking about.. good luck..

Thanks! To confirm, does your firm do 2nd lien lending, assuming title costs are not too high indeed? If you guys do 2nd lien lending, I think we should connect. And what would be the maximum LTV?

I don't do seconds at all and I absolutely do not loan in New York.. but @Beth Johnson does seconds from what I have read and is quite experienced she maybe able to help you.. private lenders probably your best bet IE those not in the business as they don't really realize the risks of doing seconds especially in a state like new York. .
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Beth JohnsonPro Member
Lender · Renton, WA · Member since 2018 · 227 posts · 216 votes
2y
I don't lend in NY state and we wouldn't lend (in 2nd position or 1st) without a lender's ALTA extended title policy as @Jay Hinrichs mentioned. It's not safe for any private money lender to do a loan without the "complete" title work the OP is referencing. We'd need a new title commitment issued that safeguards us as a 2nd lien holder. I've seen too many issues with lenders ending up in a subordinate position loan but thought they were in 1st but the gap period between when title was ran and the loan closed/recorded allowed for other liens to be recorded and the lender lost lien priority.
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Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
@Beth Johnson Would you know the exact set of title elements completed by conventional HELOC lenders? I used to have a primary residence HELOC for $200k, with full closing costs at ~$500-1000. Got similarly low closing costs for further investment property HELOCs I pulled. A refinance of the same dollar amount would run at ~5 times the above title work costs for the same properties.
I am puzzled as to why private lenders would not be competitive closing costs wise vs. HELOC lenders. How do traditional HELOC lenders stay protected?
P.S. I live in NYC, own properties in multiple states.

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Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Jay Hinrichs:

Quote from @Stefan Tsvetkov:

Quote from @Jay Hinrichs:

Quote from @Stefan Tsvetkov:

We can do the same title work that HELOC lenders complete, totally open to that. Spending ~$5-8k per property on a full refinance type of title work, not worth economically for 2nd lien, smaller equity pull outs ($50-150k per property).
I would complete a full refinance of the 1st lien instead, in case of the above.

I guess we are not talking about the same thing title and escrow is no more than 1k.. and most lenders are going to want an Alta policy but who knows maybe someone who does not have expereince .. or maybe new York is just crazy when it comes to closing cost since you have to use attornies.. but title insurance does not vary much from state to state.. So guess I am not really understanding what your talking about.. good luck..

Thanks! To confirm, does your firm do 2nd lien lending, assuming title costs are not too high indeed? If you guys do 2nd lien lending, I think we should connect. And what would be the maximum LTV?

I don't do seconds at all and I absolutely do not loan in New York.. but @Beth Johnson does seconds from what I have read and is quite experienced she maybe able to help you.. private lenders probably your best bet IE those not in the business as they don't really realize the risks of doing seconds especially in a state like new York. .
Thanks for the referral.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Stefan Tsvetkov:

@Beth Johnson Would you know the exact set of title elements completed by conventional HELOC lenders? I used to have a primary residence HELOC for $200k, with full closing costs at ~$500-1000. Got similarly low closing costs for further investment property HELOCs I pulled. A refinance of the same dollar amount would run at ~5 times the above title work costs for the same properties.
I am puzzled as to why private lenders would not be competitive closing costs wise vs. HELOC lenders. How do traditional HELOC lenders stay protected?
P.S. I live in NYC, own properties in multiple states.

the bank is probably paying for it and you dont see it.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Beth Johnson:

I don't lend in NY state and we wouldn't lend (in 2nd position or 1st) without a lender's ALTA extended title policy as @Jay Hinrichs mentioned. It's not safe for any private money lender to do a loan without the "complete" title work the OP is referencing. We'd need a new title commitment issued that safeguards us as a 2nd lien holder. I've seen too many issues with lenders ending up in a subordinate position loan but thought they were in 1st but the gap period between when title was ran and the loan closed/recorded allowed for other liens to be recorded and the lender lost lien priority.

I had this happen to me in Oakland Ca years ago a bad actor knew when fatco
s recording slot in San Francisco county was.. and the bad actor slipped in 15 minutes before FAtco's recording time and recorded a mortgage.. so when i got my title policy i was in second.. Of course I had my lenders instructions to fall back on notified the Fatco and they fixed it and went after the bad actor criminally.. I would never lend in NY as a private money lender or NJ leave those states the locals who know how to manouver and have relationships with the borrowers for a one off out of state lender to risk getting into a deal there that craters NO way.. .just look at what happened to Patch of Land that made a ton of loans in NJ there deals took years to unwind with massive losss\'s
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Beth JohnsonPro Member
Lender · Renton, WA · Member since 2018 · 227 posts · 216 votes
2y
@Stefan Tsvetkov - If your HELOC was with the bank/lender in 1st position already then that could attribute to the lower costs. A title policy alone is several hundred into the thousands depending on the loan amount and refinances are typically $500-1000 for closing so it's not beneficial for a PML to place capital and lose money on origination costs, right out of the gate. But remember that PMLs don't run things like a bank does - taking deposits, making loans, selling said loans for an interest spread, rinse and repeat. Their business model is entirely different than a private lender and they also can absorb risk and legal matters much more easily than an individual PML could.
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Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Beth Johnson:

@Stefan Tsvetkov - If your HELOC was with the bank/lender in 1st position already then that could attribute to the lower costs. A title policy alone is several hundred into the thousands depending on the loan amount and refinances are typically $500-1000 for closing so it's not beneficial for a PML to place capital and lose money on origination costs, right out of the gate. But remember that PMLs don't run things like a bank does - taking deposits, making loans, selling said loans for an interest spread, rinse and repeat. Their business model is entirely different than a private lender and they also can absorb risk and legal matters much more easily than an individual PML could.
It is 2nd Lien HELOC, high LTV as well: 100% primary residence, 80% investment. Understood as for PML vs. bank business model differences. Still from an investor loan demand standpoint, the competitive advantage of small banks in HE Loans, vs. private money seems striking.
0 Reply
Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Jay Hinrichs:

Quote from @Stefan Tsvetkov:

@Beth Johnson Would you know the exact set of title elements completed by conventional HELOC lenders? I used to have a primary residence HELOC for $200k, with full closing costs at ~$500-1000. Got similarly low closing costs for further investment property HELOCs I pulled. A refinance of the same dollar amount would run at ~5 times the above title work costs for the same properties.
I am puzzled as to why private lenders would not be competitive closing costs wise vs. HELOC lenders. How do traditional HELOC lenders stay protected?
P.S. I live in NYC, own properties in multiple states.

the bank is probably paying for it and you dont see it.
Sure. Will look to interview them for the exact details. It seems pretty common for virtually every HELOC lender I've seen (have worked with at least three) to have extremely low closing costs, not in line with a full refinance.
They primarily serve 1-4 unit, and I largely focus on 20+ units at the moment. So that is another limitation that HELOC lenders have.
0 Reply
Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Jay Hinrichs:

Quote from @Beth Johnson:

I don't lend in NY state and we wouldn't lend (in 2nd position or 1st) without a lender's ALTA extended title policy as @Jay Hinrichs mentioned. It's not safe for any private money lender to do a loan without the "complete" title work the OP is referencing. We'd need a new title commitment issued that safeguards us as a 2nd lien holder. I've seen too many issues with lenders ending up in a subordinate position loan but thought they were in 1st but the gap period between when title was ran and the loan closed/recorded allowed for other liens to be recorded and the lender lost lien priority.

I had this happen to me in Oakland Ca years ago a bad actor knew when fatco
s recording slot in San Francisco county was.. and the bad actor slipped in 15 minutes before FAtco's recording time and recorded a mortgage.. so when i got my title policy i was in second.. Of course I had my lenders instructions to fall back on notified the Fatco and they fixed it and went after the bad actor criminally.. I would never lend in NY as a private money lender or NJ leave those states the locals who know how to manouver and have relationships with the borrowers for a one off out of state lender to risk getting into a deal there that craters NO way.. .just look at what happened to Patch of Land that made a ton of loans in NJ there deals took years to unwind with massive losss\'s
I see. NY / NJ are notorious for their pro-tenant, investor-unfriendly laws. Curious as to how local regulations negatively impact private lending? Interesting if unfavorable regulations investment wise might tie to unfavorable lending regulations as well, or indirectly via unfavorable market participants.
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Jeff S.
Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
2y
Comparing a private money loan to a HELOC is mixing apples and oranges, @Stefan Tsvetkov. There’s no reason to believe that the costs should be similar any more than they would be to a car loan or credit card. And, why focus on title insurance? This is easily the most cost-effective protection you can buy, and it’s only purchased once. You’re stepping over dollars to pick up dimes. No sensible lender should agree with this.

“NY / NJ are notorious for their pro-tenant, investor-unfriendly laws. Curious as to how local regulations negatively impact private lending?”

One reason some private lenders avoid NY and NJ is the foreclosure laws. Even if uncontested, a foreclosure in these states can take years and cost tens of thousands of dollars. By comparison, and say what you want, foreclosure only takes 120 days in California for 1% of the loan amount, by statute.

Strangely and inexplicably, according to Lightning Docs data, private money interest rates in NY & NJ roughly match the national average. Thus, these states offer few reasons for an out-of-state lender to expand there.
1 Reply
Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
@Jeff S. Pulling out equity is frequently a short term loan, sub 12 months. A full refinance-type closing is not viable in this case, the APR becomes astronomical. To clarify, the desired loan here is not PML = hard money. For true private money from individuals, the comparison could hold.
Thanks for the feedback on NY/NJ foreclosure laws, this is good knowledge.

0 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
2y
Quote from @Stefan Tsvetkov:

@Beth Johnson Would you know the exact set of title elements completed by conventional HELOC lenders? I used to have a primary residence HELOC for $200k, with full closing costs at ~$500-1000. Got similarly low closing costs for further investment property HELOCs I pulled. A refinance of the same dollar amount would run at ~5 times the above title work costs for the same properties.
I am puzzled as to why private lenders would not be competitive closing costs wise vs. HELOC lenders. How do traditional HELOC lenders stay protected?
P.S. I live in NYC, own properties in multiple states.

This is the trouble HELOC lenders got into by not getting a traditional title policy.

BofA Sues First American Over Title Insurance Claims - MortgageOrb

0 Reply
Jacqueline Wright
Lender · Nashville TN, USA · Member since 2024 · 142 posts · 30 votes
2y
Stefan, it sounds like you're well-prepared for your search for a second lien private lender.

Reach out to local real estate investment groups or clubs, as they can often connect you with private lenders looking for opportunities. Platforms like BiggerPockets can be a great resource.

0 Reply
Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
Quote from @Peter Walther:

Quote from @Stefan Tsvetkov:

@Beth Johnson Would you know the exact set of title elements completed by conventional HELOC lenders? I used to have a primary residence HELOC for $200k, with full closing costs at ~$500-1000. Got similarly low closing costs for further investment property HELOCs I pulled. A refinance of the same dollar amount would run at ~5 times the above title work costs for the same properties.
I am puzzled as to why private lenders would not be competitive closing costs wise vs. HELOC lenders. How do traditional HELOC lenders stay protected?
P.S. I live in NYC, own properties in multiple states.

This is the trouble HELOC lenders got into by not getting a traditional title policy.

BofA Sues First American Over Title Insurance Claims - MortgageOrb

This is a 2010 article, pertaining to HELOC lenders not performing title searches at all. I am trying to reconcile to 'today' HELOC lenders, which do conduct title searches, though either assume the title costs, or are able to conduct same more cost effectively than PML.
0 Reply
Stefan Tsvetkov
OP
Investor · New York, NY · Member since 2017 · 263 posts · 118 votes
2y
@Jacqueline Wright Thank you.
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