1st position

14 Replies

Hi everyone, 

I am refi cashing out 1 property to purchase another 2. I don't qualify for a mortgage yet so after much searching I found a private lender via craigslist who would give me what I think is a decent rate. Anyways, I am putting up most of the money without him (through different strategies), and now he is saying he wants a first position on ALL the properties, the one being refied and the ones I am purchasing.  Just asking bec. this is my first time doing this if that is a normal request or if I should tell him only on the one I am cashing out of?

Thanks in advance!

I would say on the two you are purchasing that is expected, but not the one you are pulling $$$ out of. You say "I am putting up most of the money without him"  so there should be enough equity in the two purchases.  Would be easier with %'s or numbers.  If you were going to put a lien on your existing property that you are pulling money out of I would just to a 2nd lien HE Line for about 4% with a local bank or credit union.

is he also financing the other properties?

Originally posted by @Chris Haas :

I would say on the two you are purchasing that is expected, but not the one you are pulling $$$ out of. You say "I am putting up most of the money without him"  so there should be enough equity in the two purchases.  Would be easier with %'s or numbers.  If you were going to put a lien on your existing property that you are pulling money out of I would just to a 2nd lien HE Line for about 4% with a local bank or credit union.

 Numbers are I am pulling out 25k from refi to complete purchases of 2 40k properties. I have the rest of the money (around 65k) available.

He is doing it no doc. and giving 10% and from where I have looked that hasn't been an option.

I still have a month till the closings so I do have time to keep looking.

Thanks for your input!

If he is only lending on the property being refinanced, he should have no position at all in the other properties. I would be careful. Check out some of the hard money lenders here on BP. 

I would ask for as much collateral as I can get as a hard money lender. So his request is not surprising. If you can show at least 20-25%plus in equity in the two new purchases, I think that should be a fair situation for him to invest with a first position on both. Its all negotation! good luck

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@Mark Cohen Be specific.  You say you are "pulling out" $25k.  That sounds like you are are borrowing $25k above what you currently owe.  How much are you borrowing, and much is the property you're refinancing worth, reasonably?  Are you paying off the current financing you have on that property? Why not leave that existing loan alone, and simply borrow against the two properties you are are buying?

Originally posted by @Wayne Brooks :

@Mark Cohen Be specific.  You say you are "pulling out" $25k.  That sounds like you are are borrowing $25k above what you currently owe.  How much are you borrowing, and much is the property you're refinancing worth, reasonably?  Are you paying off the current financing you have on that property? Why not leave that existing loan alone, and simply borrow against the two properties you are are buying?

 Still learning the lingo, I am not pulling out then at all, I purchased the first property for 40k no mortgage and it is still that way a year later. (worth around 65k in my books though not sure how much the lender cares about that) and I just want to borrow 25k against it.  

I think you are right though in that I am overcomplicating it by throwing in the original property and I should just deal with the 2 I am purchasing.

Thanks for the feedback

Originally posted by @John Santero :

I would ask for as much collateral as I can get as a hard money lender. So his request is not surprising. If you can show at least 20-25%plus in equity in the two new purchases, I think that should be a fair situation for him to invest with a first position on both. Its all negotation! good luck

 Just wanted to get a feel for the norms before I negotiate.

Thanks

@Mark Cohen Okay, then a $25mtg on just the current property seems reasonable. Yes, the HML can ask to mortgage all 3 properties, but just say no.

@Mark Cohen  It's perfectly normal for a Hard Money lender to ask for multiple properties as collateral for one. Your one property doesn't meet the equity threshold your lender requires. In order to limit the risk they will need more collateral. 

@Mark Cohen

@Mark Cohen

Why don't you qualify for a Conventional Mortgage?

Again, I would just to a HE Line against the property with no mortgage.
Probably zero fees or at most $500 @ 4% or lower.  Way cheaper than Hard money, and most credit unions or local banks can get that done in less that a week.

Originally posted by @Chris Haas :

Again, I would just to a HE Line against the property with no mortgage.
Probably zero fees or at most $500 @ 4% or lower.  Way cheaper than Hard money, and most credit unions or local banks can get that done in less that a week.

 The ones I have tried all required income verification.

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