I have a current project lined up that I'm looking to use CraigBrokerage.com for. It will be an unsecured loan for the full purchase price of 125k. They first verify income then proceed with funding approval. Once approval is granted and you are notified, a $750 attorney fee is due. The funds are leases to me with 48 hours and an additional 1-3% is taken off the top. The loan terms are at 3% for 12 years. My plan is to hold for 12 months then refi the hard money out and worst case sell the property.
Has anyone heard of this company based out of Florida, or seen terms like this?
Is the attorney fee reasonable or even warranted? What are everyone's thoughts?
Also the deal looks like this:
125k loan, rents $1700, Variable exp 28% of rents, taxes 142/month, Insurance 75/month and debt service of 1035/month. Property management makes up 8% which will be done by myself.
I have not heard of this company before. 13% is not uncommon for a hard money loan. 100% financing is uncommon though. Hard money loans almost always take a first lien position on the property. I looked at their website and it seems as though they have loan programs based on different criteria. Which one are you looking to qualify for?
In general if the net income is calculated correctly (with room for capital expenses and vacancies) and can cover the interest payments then you should go for it.
p.s. as to your question about legal fees, most hard money loans will have the borrower cover some costs before closing so this is common.
The rate that I will be getting on an unsecured loan is 3% not 13%.
If got all the capital expenditures, maintained, vacancy, and property mgmt incorporated into my NOI. My NOI is pretty much equal to the debt service coverage but feel that my compensation I will be receiving in terms of the property mgmt fee I have built in, I should ok.
One reason this deal is so appealing is that I can get into it with only $3,500 out of pocket (750 attorney fee, 1250 loan origination fee, and roughly 1500 for closing).
I appreciate the feedback.
Let me guess, they want all the fees upfront before they release the funds. If it's too good to be true, it probably is!!! With terms like that, I think it falls into this category. Run.
3% is ridiculously low. If it is true, I will borrow several million from them and pay off my investors that I am paying higher rates to!
My first question is if the rate is 3% then why would you look to refi this loan out? You will not get a cheaper rate elsewhere.
I would be very cautious because something doesn't make sense here. I have been lending in the real estate arena for over 8 years and have never heard of these kinds of terms. Unsecured, 3% and 100% financing don't normally go together.
Now there might be something I am missing here. That is why I asked you the earlier question about which one of their programs are you applying for.
I would be very wary about giving these guys any money before doing some serious due diligence and seeing the approval. If you would like me to look at the term sheet, I would be happy to give my two cents.
Your reasoning as to why this deal is so appealing is totally correct, but from a lender's perspective it doesn't make sense and that is when I get skeptical.
I agree Ben, I'm very skeptical at this point of the whole process and plan on having a phone conversation with them tomorrow. The program I would be going with is the Unsecured Personal Loan.
The reason I would be refinancing out of this loan is because the max term is 12 years, giving me a debt payment of $1,035. Refinancing in to a 30 year conventional at 5% lowers my debt payment to $679 with the difference in payments flowing directly to my cash flow.
Hi @Logan Hassinger ,
I agree, have a conversation with the lender to get more clarity. I looked at the website again and unsecured personal loans like these are normally very expensive. It is not uncommon for the rates to be 3% per month or even more. The amount that these lenders allow you to borrow is also related to how much you deposit into your bank account each month.
Thanks @Ben Rutkevitz I appreciate the insight. Do you have any suggested questions other than what we have discussed?
Some great advice here about being very cautious. As I just read through the whole tread, what came to my mind are they saying 3% per MONTH, and you are reading it as 3% per YEAR?
I got a 3% annual loan recently, but it was from a friend who had funds in CDs, AND it was backed by a 25 year relationship and a second position on the property (fix up funds). I dont imagine EVER getting those rates from a stranger or business.
Thanks for your feedback on the interest rate. I will be confirming whether it is a monthly or annual rate today when I'm able to speak with them.
I'll keep everyone updated but my guess is it's monthly.
Hah wow, I just saw that. That right there is it for me. Thanks for pointing out the obvious, or not so obvious to me lol.
I guess I'm moving forward with a standard conventional loan and 20% down.
Thanks to everyone who commented.
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