100% Financed Interest Only Loan

10 Replies

Hoping someone can help me shed some light on this. It may be something interesting or it may be something I don't want to touch with a 40 foot pole...

I've been looking for commercial financing, came across a website (not sure if I'm allowed to post the site here or not) offering 100% financing (wasn't acutally looking for that much) but thought I'd call out of curiously. The phone reception wasn't great and the guy talked very fast as if I'd done this before but here's what I got out of it:

For $1MM Loan, they would offer a 5 year interest only loan at 3.1-3.1%

My partner and I would need a security deposit $150k + $20k (not sure about the 20k?)

They would issue a LOI within 24-48 hours (I believe this is after we bring them the property?)

After 5 years the loan is due or we refinance. No early payoff penalties.

It would look good if it works out like this: Say we find a 9 cap $1MM apartment. $90k - 32k interest = +$58k after debt service. After 5 years of making $58k we have just under $300k and have a proper down payment to refinance. (Or we sell the property and pocket the $300?)

We would need to go to California to meet the lenders in person the first time.

He said my partner and I didn't need experience as long as the apartment/property had a management team in place and we had a security deposit.

I am going to call back but wanted to see if I could get a few questions answered here first so I come across as knowing what I'm talking about:

1. Is anyone familiar with this type of program?

2. The $150k security deposit. He said we would get this back.... Does he mean after we either close the deal or the deal falls through during due diligence? Or are they holding it as collateral until the 5 years is up? (wouldn't really be 100% financing then...)?

3. The $20k? He kind of snuck that in their, so I'm taking it that's their cut for securing lender/financing?

Is there a term for this type of deal so I can look it up and gather more info? It seems too good to be true if it works like I calculated above but still peaked my curiosity...

I didn't get the greatest vibe from this guy as it seemed he was being kind of short with me. I asked him if he could email me the program info to show my partner and he said the company doesn't send out info until it is time for us to see the contract, but that I could call back with my partner on the phone... 

Thanks in advance

Sidenote to Readers: In banking terms MM means millions and M means thousands; can get confusing when you ask for a $150k line of credit and the banker sends you a commitment letter stating $150M.  

The age old cliche of "If it sounds too good to be true, it is." 

Be very skeptical... very few people with $1MM are going to lend it willy-nilly; the ones claiming to be are probably up to something unscrupulous.... Think: Prince of Africa, need $1000 to get home but I will repay you 10x when I do!

Mitch Coluzzi, Contractor in IA (#C124035)

BS.  You'll be paying upfront fees, and never get a loan.  Or maybe they'll just take your "security deposit".

Yeah, I believe the $20k is their fee and maybe they keep that whether they secure funding or not.

I just read Josh Dorkin's sticky and from the looks of it I think I'm okay to post their website (they have a linkdin page, too). 

If someone can let me know if that's okay I'd like to post it and see if anyone's ever heard of them...

The 150K security deposit sounds like pure bull.  I have never heard of one of those before for a loan.  Why would they ask you for $150K when they are giving you $1,000,000?  Does NOT sound right.  Be VERY careful.

I know who you're talking about. I've called him too. Do a BBB search on his company. I think that will tell you all you need to know.

@Louis Cavallaro    You should probably listen to @Matt Peebles .  I think you can give there name by the way.

I do not know the company but I think best case is the $20,000 is points.  So you are buying down the rate with it and will not get the money back.

The other $150,000 they will want to hold the entire time probably without paying interest.  If they pay interest is was probably put into the rate you already mentioned, so the true rate of interest for the entire deal is not so good.

They are going to want to the $150,000 the entire term.

Which means you could lose the $150,000, plus the property, plus get a judgement against you if they decide you owe them more.

Ok that was best case...

Worst case...  they will take your $170,000 and never give you a dime.

Originally posted by @Michael Biggs :

@Louis Cavallaro   You should probably listen to @Matt Peebles .  I think you can give there name by the way.

I do not know the company but I think best case is the $20,000 is points.  So you are buying down the rate with it and will not get the money back.

The other $150,000 they will want to hold the entire time probably without paying interest.  If they pay interest is was probably put into the rate you already mentioned, so the true rate of interest for the entire deal is not so good.

They are going to want to the $150,000 the entire term.

Which means you could lose the $150,000, plus the property, plus get a judgement against you if they decide you owe them more.

Ok that was best case...

Worst case...  they will take your $170,000 and never give you a dime.

 After comments on here and doing some light digging it was easy to see that this was likely a scam and at best case very flaky. The guy would not give me anything about his process is writing over email. I'm trying to recall his name and company. Will report back when I find it if that's permitted. 

@Louis Cavallaro Giving the name will really help others.  People search for names on the forums all the time.

Originally posted by @Michael Biggs :

@Louis CavallaroGiving the name will really help others.  People search for names on the forums all the time.

The company name is Private Funds LLC, website is http://www.privatefundsllc.com/ and I believe the man's name was Larry or Laurence/Lawrence. He previously had the same type of thing going under a different company name which had TONS of complaints/lawsuits. If I can find that info again I will post.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.