Private Lending Options in 2nd position?

Question

I have multiple properties with equity and cashflow I am looking to put a 2nd private mortgage on and I would pay 10% Interest only payments per month. Does anyone know anyone who might be interested in having a conversation around this type of thing?

Thanks for your help!

Jay Hinrichs · Answer

these are tough.. there is no one who has a for profit business that is writing these

especially at that low of interest rate. Market rate for seconds if U can get one is 15% plus points or higher.

Suggest you go to family and friends that will do it to help you out as much as anything.

Good solid first position loans are paying 12% plus..

Andrew Postell · Answer

@Ryan Luthi yup, agree.  This is something you should be working within your own network of people that you know.  10% is for 1st lien loans of this nature.

Ryan Luthi · Answer

@Alex Breshears thanks for the info!  Great advice and input!

To clarify I have 2 properties with 50% or more equity and both will have positive cash flow even after a 2nd, so all good there.  They are cash cows that have equity, hence the idea to try and leverage some of that equity but keep the low rates on LT financed debt.

please reach out if you are anyone you know would like to connect with me directly and speak further.

12-24 months works, but 36 months would be amazing.  I have a plan to do some flips/wholesale deals that should make repayment a non-issue.

Thanks everyone!

Darin Stoltzfus · Answer

Thanks for this useful info! I would love to chat on the phone. Are you ever working with lenders who will do 2nd position (GAP) on fix and flips? Please let me know when we can hop on a call!

Alex Breshears · Answer

As a private lender who lends out her own capital I’ve done these loans.

But before you get too excited here a few things to think about.

1) Equity to the active investor is often thought of in dollars. You look at a property and think my mortgage is $150k and the property is worth $200k - so I have $50k in equity.  The lender on the other hand looks at it and says you are already at 75% loan to value so there’s really no equity to tap.

2) Will tapping that equity cause the property to become cash flow negative? Extra leverage means extra monthly payments. Can the property truly support that. The last thing you want to do is turn an asset into a liability.

3) What is your plan to repay that lump sum? Most lenders I know willing to do this are short term loans that have a balloon payment in 12-24 months. Are you using the capital in a way where the time frame aligns with paying off that lump sum? For example - pulling equity out to do a fix and flip - you could get that capital back in a year and repay the 2nd. If you are pulling it out to spruce up a STR and think the increased cash flow will repay the loan - that timeline may not add up.

there are a few other metrics I look at when thinking about second lien - and there may be a way to shore up more equity to make a second lien more appealing. Feel free to ask questions - always happy to help!

Private Lending Options in 2nd position?

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