LENDING ADVICE, DETAILS AND THE IN'S AND OUT's THE REAL SECRETS

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I just posted to another thread in this forum where someone was asking how to make a loan. Details seemed odd to me and decided to bring this area of lending or borrowing up for some discussion.

THE REAL SECRETS IN LENDING:

There are none as to the functions, documents, processing, underwriting, settlements, administration or collections nor to any legal aspects. The only secret is in the minds of lenders in sizing up a borrower as to character, ethical aspects, intent, and if someone is blowing smoke at them. Yes, there are con artists, liars, cheats, crooks and others who attempt to borrow under false pretense regardless of laws and penalties.

I've given a lot of information out here, there are gold nuggets of financing matters scattered in thousands of posts, too much really, but most of it is here.

We also have hundreds of real estate investors here who have done some form of financing, Realtors, commercial guys who throw out comments and advice in financing and most are incorrect. We also have a few very astute lenders in various areas giving very good advice. Those that really don't know should really say so instead of attempting to be seen as if they do, not only can you get people in trouble, you make it much harder for those who do know to correct statements to ensure the quality of information on BP. Not say not to comment to add to discussions, just asking that your qualify yourself as to suggestions.

Here are other concerns relating to fraud and those types first mentioned.

Lending is an area that is conducted in a confidential manner and I doubt you'll get any banker that walks through the step by step process and alternative aspects considered in lending. A main consideration for not spilling the beans is that such information can be gathered to fabricate cons.

I could probably slick any bank out of a large chunk of change if I were a criminal type, of course I would not, but there are many who, if armed with greater knowledge would attempt to tweek an application or verifications or collateral to get past some issue they may have......too bad, but there are.

There are audit aspects that I do not and won't discuss, there is no need to know by investors, borrowers or private lenders. Just as the government has national security secrets and such are limited on a need to know basis, there are areas of banking and lending that are off limits to those not having an operational need to know.

There are no secret formulas and no conspiracy but security is need to protect the public. That's what financial regulation is all about, protecting the public, the economy (like the crash) stockholders, buyers and sellers in real estate and commerce in general.

A couple of us on BP are known for long posts, some with more flowers than others, but relevant to the topic. The detail is often needed to understand how a lender should be operating. Not all details apply to all loans. I don't think anyone fully explains all aspects of either side of a Note or Security Agreement. All the details aren't here I'm pretty sure, but most has to be by now.

Point of all of this is to say there is a bit of responsibility in giving financing advice or details just as an attorney gives legal advice or a CPA gives tax advice or your doctor gives their advice. The other point is that those giving details is much like a doctor giving a prescription and if the patient takes the medicine the wrong way or it's the wrong medicine the results can change that persons life or even end it.

Now comes the qualifying  question that keeps this from being a forum discussion rather than a blog!

How do you, the members here, view advice given in financing topics, lending, borrowing or in the note business. By "view" I'm asking, do you qualify the source of information you might use? Is it really something you will take to your attorney or are you really going to rely and act on the information you get in forums yourself? Do you just take everything with a grain of salt? Do you really think that because someone made a lot of money doing something five years ago can be duplicated, or is correct ? Are you aware there are smooth talkers here that might be popular but don't really have a clue and write bad prescriptions? Can you recognize when you're getting a pitch where the hook is set later on to set up some transaction? Can you spot those looking for shortcuts, loopholes or just ignore regulations?

My view, I try to give advice that I see as being applicable for that original poster, I will comment on other comments as well, everyone knows I point out regulatory issues, that's to keep folks out of trouble. If  see someone wanting details I have to weigh the need they have in some areas, I never know how the advice I give will actually be used. I only post to educate and advise, I have no business relationship in the advice I give, I don't, but may do business with select members (just disclosure but not actively engaged). I hope there is a benefit (I know there is) but I often hold short on many points for fear that someone will misuse suggestions. I sense where people are coming from, pretty well, and if I get bad vibes, I'm not going to add to their abilities to do damage.

So, how investors here take in information and ask for information matters, how we give advice in this area really matters. Finance is not part of real estate, financing facilitates doing real estate, they are two different worlds. If you violate some state real estate matter, you might get fined for some low level screw up. If you violate financial laws you're venturing into federal law and a minor infraction can cause you to lose the money in your deal plus, you could be fined and they begin at ten thousand dollars and go up. The risk level of a residential investor in real estate might be viewed as a 3 or 4, in financing matters and dealing in notes, that risk becomes a 6 or 8, mostly because so much more is involved and an RE deal is over in a month or two, financing transactions last for years.

Okay, this really isn't a rant, I'm really asking how you view all this????

:)

         


How do you, the members here, view advice given in financing topics, lending, borrowing or in the note business. By "view" I'm asking, do you qualify the source of information you might use? Is it really something you will take to your attorney or are you really going to rely and act on the information you get in forums yourself? Do you just take everything with a grain of salt? Do you really think that because someone made a lot of money doing something five years ago can be duplicated, or is correct ? Are you aware there are smooth talkers here that might be popular but don't really have a clue and write bad prescriptions? Can you recognize when you're getting a pitch where the hook is set later on to set up some transaction? Can you spot those looking for shortcuts, loopholes or just ignore regulations?

Personally, I have a fine tuned BS meter, reading and following posts on BP long enough will show who the real players are and who the pretenders are. My number one goal is to take care of my family, and to do that I have to defend my capital, I work to hard for it to roll the dice on any advise I might get on a forum. That said, there are some smart, driven, articulate people on BP who I would be comfortable researching working with. My bottom line is carefully vetting the the person first, then the deal. I don't mind losing money if I did all my due diligence and made a bad deal, what I would mind is losing money because I took a shortcut, or did not fully understand the risks and went ahead anyway. That is why when I find someone to invest with I put a lot of trust into that relationship because I satisfied myself they are worthy, have checked them out and had all my boxes checked. 

I have learned a lot on BP, and there are certain people who I alway read their comments and posts. Some I like more than others, but that is personal, not business. you don't have to like someone to learn something. I do not engage often on these forums because I have more to learn than teach. My favorite saying is " its better to keep your mouth shut and have people think your a fool, than to open it and prove them right". In my opinion most of the posters who offer advise are sincere and believe they are helping, that is why it is so good to hear counterpoints, maybe keep you out of trouble or from making a big mistakes?

What an exasperating topic, I am glad you took the time to point it out. I'll be the first to admit that I don't know much yet; I am still having trouble going from zero to the first deal. Although BP is an amazing way to learn, you are right, financing is tricky. I'd venture a guess that those of us who are just starting out are most likely to rely on the free advice that is here. With experience I'm sure that you learn who you can trust and what is allowed or not allowed in your state. It seems like financing is the biggest barrier to getting started for a lot of people I listen to, so when an answer appears to be right there in black and white, we want to believe it and follow that course. 

With the goal of buying a deal by the end of this month, I might read some financing topics here, but my gut tells me that what will end up working out better would be to talk to people in my area REIA group who are actually investing and see who they trust to finance their deal. I like to shake hands with people with whom I do business. If I fall for a scam online, shame on me, but if you look me in the eye and purposefully mislead me, shame on you, is my kind of philosophy. Also, it will be better recourse for me to say, "Hey, that guy you recommended really screwed me!" than to just blog angrily about such and such a person or company. Like everyone says, "Trust but Verify," it is easier locally in person than on internet advice, to me.

Shaylene, sorry to inform you starting out, but there are many in real estate, including REI groups who will look you in the eye and give you bad information. Two reasons usually, they think they know but they don't or, they going to benefit.

Best place for you to start is at your bank or a good mortgage broker and start out conventionally. If you lack funds......well.....you can start by finding those you trust for advice. If you deal with a private lender ask others about them and to be on the safe side, don't use a private lender referred to you with that person introducing you to that lender, they can have other relationships that can cost you without you ever knowing it. 

Good to see you didn't fly the coup Rick, it's been awhile, missed your questions and comments.

I'd say you pretty well hit it as to taking advice.

Wonder if there will be comments from those who give it as well?

Don't be shy, I've taken off my critical lending hat, it's about the interactions, building trust, due diligence and finding answers. :)

Great topic! I personally research a subject to death in order to educate myself, and then seek out professionals to validate, and keep me in legal compliance with any endeavor - whether personal or business. That may be a benefit of my experience in business administration where I had a team of professionals and colleagues to help me make the right decisions. In the corporate environment, that's just the norm. Not everyone has that foundation to draw upon when starting out in REI. It's a completely different ballgame in real estate. We need to learn the difference between a colleague offering good solid advice, and the stealth sales pitch. Trust but verify. Check out quality of posts, websites, LinkedIn and any other background information.

Since I'm new to the REI arena, I've spent considerable time learning, observing, following and reading select member posts on BP that I've come to trust, just to understand the nature of this diverse business. With the exception of REIA membership fees (which I consider equal to professional association fees) most of my REI education has been free, and I've taken it slowly. There are so many facets of real estate investing, one can easily become overwhelmed by the sea of information available. Focus on a niche, learn from a number of sources, and pay attention to the details. And when ready to start, make sure you have a real estate attorney and accountant on your team to keep you out of trouble.

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