All Forum Posts by: Dion DePaoli

BP has a variety of threads on the topic which are free to read for you. Additionally, there are many experienced folks here on BP that contribute to those threads regularly. If you look at the category Tax Liens, Notes, Paper & Cash Flows Discussion here on BP you will find a bunch of information.

William it is not completely clear on what you mean by "trusted". There are indeed websites which legitimately market whole loans. Those include FCI Exchange, Loan Market, Loan MLS to name a few. Additionally, there are auction sites such as Auction.com and NIAM.com which sell via bid auction whole loans.

Here on BP there are some folks who work with various sized investors new and experienced in the identification and acquisition of whole loans. My firm does training for those wanting it and then adds that investor to our sales distribution list to see what we have for sale. Dave Van Horn's firm also does something similar with investors but focuses on second lien positions. I know we do not charge for training and I believe most of Dave's stuff is free as well. The benefit is training the investor who you can then work with, much more beneficial than a training fee.

Then, as far as I know, BP is the single largest whole loan discussion option available in the market. Folks with varying experience in both private and institutional markets including a resident retired examiner. So in that sense, BP, IMO, is one of those "trusted" sites, as there are too many of us here for information and knowledge to be inaccurate.

So welcome! Feel free to further detail your inquiry as needed.

You are talking to the wrong guy. There are other private investors who will take a simple debt role, just charging interest and fees and there are other investors who will take an equity role. All that said, the guy you are talking to sounds like he is brokering his investors money to you. Ensure he has a license, number one. Number two, you are approaching usury on the note at 12% + 4% in most states.

Giving him or them control of the LLC would be a non-start for most folks. Once you sign, they can oust you and then what?

You could trim this deal down, reducing his equity portion of the LLC or talking off the top some guarantee fee first, but again, I think there are plenty of cheaper folks out there, even here on BP if you look.

Have you tried to explore an alternative, perhaps a bond or insurance guarantee for the lender?

Simply sounds like, you as a wholesaler gets an agreed Deed in Lieu approved from both the owner and the bank. You then simply go assign a contract or sell the property to a new person.

Generally speaking, a unlicensed person will not get paid to negotiate a DIL with a owner and a bank. So what is likely being taught is how to jump in the middle. Simply search on whole-selling here on BP, you will find enough material to fill that course several times over.

The owner either knows the impact of what happened or they do not. You would have to talk to the owner to find out.

That said, the owner QCD the property to the new guy subject to the existing mortgage. If the rent payment is less than the mortgage payment, foreclosure can take place as I doubt the new owner is paying the full mortgage payment. If the new guy is paying the mortgage (which I really doubt), the old owner is paying for the mortgage debt anyway and he made a bad deal.

The QCD event is inferior to the mortgage, so it essentially didn't happen. The old owner is still fully responsible for the mortgage debt and the new owner has an inferior interest in the property, so all the repairs they are making can end up being lost money if the bank forecloses, which is within their rights for lack of payment. The new owner would have no recourse to recoup those monies from the property since their interest is inferior to the mortgagee.

This will be deal specific. The lender has not duty to clear the liens in any manner, they are not the owner and you do not contract with them to provide you with clear marketable title, that is the owner.

You might want to check into the liens yourself first and foremost. They maybe easily cleared, which can put some cards in your favor. Sometimes city liens are for lack of permit inspection or other simple fix concepts or they might be able to be negotiated down to a lesser amount. The key is, don't rely on the real estate agent to paint the picture of your deal. Get all the details yourself and then make your offer, perhaps in two forms (1) where you offer more and the liens are paid as a function of closing or (2) you get a better discount and pay the liens off, post closing or at closing via your own capital.

Fannie/Freddie (Agency Loans or Conventional Loans) in general do not have any prepayment penalty. So from the loan standpoint, there is no time requirement.

The market really takes care of this for the lender too. A purchase transaction will have a more favorable interest rate in connection to the Loan To Value than a refinance. This creates it's own market barrier to want to refinance in short amount of time. In that sense, it may not be feasible for you to refinance as there will be no benefit. In a short time frame, you will have not paid down too much principal on the loan. Because of this, the Purchase loan maybe a 5% rate at 90% LTV and the Rate & Term Refinance rate will be more like 6%. In this case, you as a borrower have not payment benefit and maybe denied the loan for lack of benefit to the borrower. (your payment goes up, instead of down)

It is slightly possible to obtain a Cash Out Refinance, provided you put enough down payment down but there are restrictions on LTV which create the barrier on those types of loans which may prevent you from qualifying. That said, if this is what you are wanting to do, look at simply paying down the debts prior to the getting the mortgage, you are essentially using your own money and paying interest on it to pay down your own debt.

One other side note, First Time Home Buyer programs are more of a marketing concept than a real loan program. Coined by real estate agents and mortgage brokers. What is generally referred to when talking about a first time buyer loan, is simply a loan with relaxed qualifying criteria for the borrower. Typically, the down payment is relaxed allowing for a lower entry for a first time borrower. Some of those programs will be a one loan solution and some will be a two loan (first and second) solution. One of the more popular loan programs right now is FHA (Ginnie Mae) with a relaxed down payment requirement, relaxed DTI criteria. That said, those loans have LPMI which will cost you as a borrower more in payments.

When ever a borrower puts down less than 20% and has less than full documentation for income and assets, the risk is greater so the interest rate will be higher. Loans with less than 20% can have mortgage insurance paid by the borrower or the lender, depending on the investor's loan program.

In any case, the simply question to ask for you, "Is there a pre-payment penalty". Whether you are a first time home buyer or a season vet is not what drives that parameter in those programs.

There are some states which require the mortgagee to hold a license as a principal. Look up the state rules that you are thinking of investing in on their state website.

For the record, 10% for the firm to raise money is the standard industry fee. The firm MUST be a licensed Broker/Dealer and you MUST have a Private Placement paperwork including your subscription documents and prospectus.

Selling a third party investment is a licensed event requiring a Series 7 license under a licensed Broker/Dealer. You are full fledged in Regulation D territory.

It is actually not uncommon for good capital raising firms to actually get a piece of your deal. At the least, you pay for their raise annually. So each dollar they raise each year you will pay for it.

In my time we have used a couple and interviewed many. Their capacity to create nice presentations is not what you want to hang your hat on, they call can put together nice presentations. If you are serious about teaming up with them, you want to know what their capacity for the raise is. How much capital have they raised for this industry in other similar projects. What is the max and average capital raise they did for other projects similar to yours. Then you want to ask, how long it took.

Some firms will sell you on the one or two whales they think will invest. Problem is if those guys do not invest some firms struggle with sales distribution and they swing and miss the raise or they raise a small amount. Because of that, you will want to watch out for the non-compete clauses.

Real good firms don't take on projects unless they are going to be successful. Real good firms have niches. They can raise well for certain industries and that is what they focus on. They should also be able to tell you what type of return parameters their investors are typically looking for and you should be able to compare your structure to those of their more successful raises.

Again, it all sounds like a great idea right now, but you have to also remember, capital investors get to make the rules right now. So there is downward pressure on manager fees and lockout periods and upward pressure on return targets.

The comment about hedge funds having a 2 to 3% referral fee is not the same as a capital raise. The 2% to 3% referral will is a split for a referring broker. In other words, their sales force contacts another broker/dealer and say that firm has an interested investor, they will offer a 2% to 3% fee for that firm to refer in. That fee is also for the life of the investor in your fund/projects.

A good capital raise firm handles all investor intake for you. This includes the vetting of an accredited investor. They should be required to setup and maintain on your behalf the files needed on hand to stay compliant.

There is a little confusion in the thread it seems, the capital raise firm may help refer you to a SEC/FINRA attorney to draft the PPM and subscription documents. That does not come out of their fee. It is separate. Those documents are expensive anywhere from $75k to $150k depending on the structure and complication.

When you get that serious, you also have to beef up your administrative costs. You will want an outside accounting firm to work with and I always think it is a good idea to have a fund administrator. This is also separate and apart from the annual audits that will be needed.

I agree, in this area many people want and think they can help raise money. However, most are not compliant. Without a license, you can not put an investor into a third party project, period. If you fail to ensure there is a proper license is present, you could face serious liability from the investors and the SEC/FINRA for that matter.

The real way to have an unlicensed entity raise for you, is they become a General Partner of the fund/project. This turns them into a principal and not a third party.

Because of their fees and the cost of the paperwork, good firms do not raise for capital under $5 Million usually. The costs under that number usually are a barrier to profitability for the project/fund and the manager. In many cases, real good firms will not even talk to you unless you are talking about $20 Million or more.

Just remember, the fee for the raise comes off the top. So what ever your raise is in dollars, plan to start at 10% less. So if you needed $10 Million, you really started with $9 Million and need to make the $1 Million for the raise through your profits. That happens before you break even and hopefully thereafter make a profit.