Investor · Austin, TX · Member since 2017 · 24 posts · 5 votes
I wanted to get your opinion on a financing situation where borrower/buyer is looking to finance at 65% LTV - value is under 300K.
The seller is willing to finance/note for 40% of the money at 2nd lien position. We would fund 60% of the transaction price + 5% additional money allocated towards improvement. We would get first lien position.
It is a 5 year+ loan. The question is with borrower no money down, would you do this deal.
1. Does the borrower have a great track record of successful deals/projects/ventures?
2. Do you know this borrower well? How about his/her family?
When somebody wants to run a deal with zero of their own money into it, they are exposed to no risk, meaning you are taking the risk for them, and you're depending hugely on their character. Not a place I want to be 99.99% of the time. I'd be asking those questions first before I even started looking into the borrower's income and credit worthiness. When somebody wants to do a deal and has zero of their own money going into it, if they don't check out on steps 1 and 2, I'm not even going to bother vetting them the rest of the way.