All Forum Posts by: Dion DePaoli

Seems like you should start calling other attorney's and title companies to see if they do work with whole sale contracts and transactions. You have a deal with no team put together. In the interim, perhaps find a IL wholesaler to look over your contract.

You posted this in the Exclusive Pro space, so you might think about posting in a more public forum so you get more folks involved. They can't see and respond here.

That is a respectable offer. Impressive. Love seeing young folks take initiative to carve out their dreams. I wish you the best of luck. If I hear or see anyone who might have interest in your offer, I will send them your way.

Seems to me the elephant in the room is missing from your list. At what sort of discount do they expect to get into the pool of assets at?

Certainly, they are not looking to get into properties at 100% of RE Value otherwise they don't need you for deal flow. Those deals are everywhere.

Aside from the missing discount, there are likely many other criteria they have that you are not aware of just yet. Minimal capital deployments. Current occupancy. Rehab level. etc....

In addition to all of that, it is not precisely clear if you will take a principal role in the purchase and sale contract or if you simply are trying to broker the deal. If you are brokering, you are clearly acting without a license. Licensed real estate agents will come after you if they see you doing this and report you.

Attempting to wholesale a bulk portfolio is pretty close to impossible. The seller in most cases will be institutional and they are aware of counterparty risk. Therefore, they will look into your actual capacity to conduct a large trade. If you don't have the capital or competence, the conversation will end pretty quickly.

Inside those bulk contracts can be representations and warranties that you as a middleman may not want to make but the end buyer needs. Adding another level of complexity.

I have traded (purchased and sold as principal) bulk residential properties. Those pools are not all that common any more. It is difficult to make sense out of the discount that is sought from a seller's perspective. The last real property trade I personally did was in 2009 with a bank. Back when banks were busy trying to reposition their balance sheets to stay off the regulator's radar.

I am not seeing anything in their criteria listed that makes me believe they have some type of niche to exploit. In addition, some of the criteria is going to limit the assets they get to look at. I think you really need a niche or be open to opportunistic characteristics on the asset criteria in order to get anything going. This criteria sort of says, give me the good stuff and keep all the bad stuff. BTW, I want the good stuff with a sizable discount. IMO, not a very practical approach to the market right now. So me a REIT that can take my low value REO in war zones and offer me a fair price and they make money, that is a trading partner everyone wants. Show me a REIT that only wants median valued homes in major MSA's and only SFR, with light to little rehab and I will show you every other investor in the US with the same desire.

In the last couple of years, all sorts of capital firms have sprouted up with similar intentions as this REIT. Many of the previous ones have already went out of business or didn't actually deploy capital due to lack of deal flow and simply closed before they actually opened. Be careful you are not wasting your time.

Not familiar with the firm mentioned above.

My suggestion is simply go see a real estate attorney. DIY seems all fine and dandy until the two parties have a falling out. That is when borrower defaults or family lender attempt to accelerate and foreclose without cause or who knows what else they might do. In spite or even in accident.

The DIY thing for loans secured by real estate is pretty silly, IMO. This is one of those cases where you don't know what you don't know, so how could you know what might be an issue in the future for either party. Not to mention, you could end up 10 years into the loan and find out the documents you used are wrong for the state the property is in or the loan has some other material defect making it void and unenforceable. (you already broached the idea by not perfecting the lien)

Doing it properly under the guidance of an industry professional will help all parties involved. Both parties will have peace of mind the documents are correctly setup and fair and the transaction is done properly.

In addition, the Lender might also want to look into a Mortgage Servicing Company which will relieve the administrative burden of the loan from them. This also helps keep the relationship a bit more stable. In life, things happen, sometimes friends/family want other friends/family to understand and share in the event that may be a burden in concession. It is not uncommon for family members to often times try and miss a payment or make a payment late or try to defer payments. Having to go through an independent third party removes some of the ease of this, removing the personal tugs that come with family and friend events like this.

Good intentions often fall victim to unforeseen events. Loans are not simple instruments by nature. Many concepts need to be discussed by both parties so everyone understands the risks. This is why the loan industry works in the manner that it does. Language in the security instrument, note, and title policy, etc all affect both parties. To ignore those or avoid those for the sake of 'ease' is a disservice to both parties.

Moral of the story, by not want to make this complicated, you will make it more complicated. Be more concerned for both the borrower and the lender to do it properly and entirely. Don't cut corners. Everyone will be better off in the end.

I am pretty sure RESPA would require all funds being disbursed to the borrower to be provided on the HUD 1. There is some affirmative defense that can arise if the funds are not found on the HUD 1. Such as, "I didn't get that money".

Michael Siekerka, I think honed in on the core situation. However, it seems to me, the HML guy implies he is tapped out per the restriction, if he has to wait for the restriction period to end.

That is an important point. What happens next could be trouble for the lender and possibly the buyer. If the lender to some degree, agrees to use the same loan documents (ergo - same loan) I could see how this becomes a compliance issue where two parties colluded to circumvent a legal restriction. The lender by using the same documents and simply modifying to increase the loan amount is also saying in public record, this was my intention the whole time. Perhaps it takes a little extra effort to connect those dots but it is not what I would consider clean.

So then, the 'clean' way to do this is through a new origination or a second lien. The new origination seems the ideal clean slate. I could see a similar argument arising around the second position. Which simply points out the intention was to lend the entire amount the whole time and by splitting the loan, all they did was skirt the restriction.

I would assume that some may read this and say, well who cares, they didn't violate the restriction since they didn't exceed the 120% and waited until the 90 days had elapsed. However, the intent, which regulators look at, of the restriction is sort of cap the equity increase of the property in such a short amount of time.

Curious what Bill Gulley thinks about this one.

Aside from that. I agree, there doesn't seem to be any recourse and in fact the HML guy simply has to argue they don't want liability for circumventing the restriction and the conversation is over. So then, any additional funds, 45 days after closing is sort of the definition of a "new loan". Whether that is a new first lien or a second lien is up to the lender.

If the lender doesn't want to work with you on a new loan. Then pursue the other options expressed in the thread. Of those, I think finding some private investor to put up $15k to finish the rehab and offering them perhaps 15% on his money or $2,250 will attract folks. Even more so if you can borrower and pay the money within a timeframe less than a year.

Bill Gulley I guess the fastest way to shorten my post is to take away my line break. Makes it painful to even look at a long post. Like having to run 100 miles non-stop.

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