All Forum Posts by: Jeff S.

There seems to be some confusion here. Transferring ownership of a loan is not the same as transferring ownership of the property that secures the loan.

Transferring ownership of a loan (e.g., changing the beneficiary) is done using an allonge to transfer the note and a recorded assignment to transfer the mortgage or deed of trust. You will work with the title and hazard insurance providers, and notify the borrower that their payment info has changed.  See @Patrick Roberts response.

Transferring ownership of a property is state-specific but can often be done with a quitclaim deed. This has nothing to do with the OP’s question.

Who am I to say what will or won’t work, @Kelly Beck? What I can tell you is that we meet and have lunch a few times with each potential borrower to get to know them, and for them to get to know us. It can’t get any more casual, and anyone treating it like “storytime” is likely in for a very short meeting.

The whole point is to genuinely get to know one another and our respective backgrounds. If someone prefers to play games or lean on gimmicks, they’re probably not a good fit.

Why not just be yourself?

History is only repeating itself. In my view, it closely mirrors the conditions that led to the 2008 crash. Lending has become so competitive that many lenders, desperate to close loans, have lowered their standards to the point where almost anyone with the flimsiest qualifications can secure financing for the weakest of deals. They bundle their loans, sell to Wall Street, and work with brokers or affiliates. No one has anything to lose.

The pattern of passing the buck—from brokers to lenders to Wall Street—without any sense of responsibility or accountability has become the norm. BP is a good example. These days, it seems that every other post includes three or four "lenders" urging the OP to “hop on a call” so they can solve their problem (i.e., make a commission). Heaven knows how many fall for the DMs we never see.

I wonder: of the $200M in defaults, how many were originated by a faker lender or joker broker with no skin in the game, versus direct lenders who use their own funds, hold their loans, and only make money when the deal is successful?

We’re just slightly smaller than Kiavi 🤪, but we’ve been lending our own money since 2010. We’re not desperate. We evaluate every property, build real relationships with our borrowers, and as a result, have had only two foreclosures since we started—with zero intention of compromising our criteria.

It’s both interesting and, frankly, shameful that Kiavi mined Florida for all it was worth, then bailed. Good riddance to them. Rest assured: lenders who make sound decisions, work with experienced borrowers, and fund practical deals will step in to fill the gap.  Most likely some of the big guys will disappear or they will change their lending criteria.

“I’ll agree to your price if you agree to my terms,” is the golden rule of deals like this, @Raquel Baranow. Don’t get backed into a corner.

I agree with @Patrick Roberts. If you are going to sell at a price substantially below the market, even considering the smoke damage, ensure the terms are in your favor. Selling at 3% interest amortized will leave you with nowhere to go if you want to sell your loan.

“Amortized over 10 years If balloon payment, principal balance due on or before 06/01/2035,” is not even English. No wonder you’re confused. So am I and I can’t believe the Arizona Association of Realtors would use this form.

If your buyer wants lower payments, consider making this an interest-only loan with a decent down payment and maybe a shorter term to maturity. This would keep the principal balance unchanged over the term of the loan. For example, an $850 monthly payment interest only is a 6.2% return on a $165k loan. With a $20k down payment ($145k loan), a 10% or 12% return would require a $1208 or $1450 per month payment, respectively. Was your rent below the market? Run some numbers and don’t let your buyer set the terms.

Most importantly, I see where this is going: You’re going to use loan docs provided by your borrower. Right? Do you think they will be in your interest? These should be written with zero ambiguity by your lawyer. I know you really, really want to get out. Do you know how hard it is to find good deals now? You have something others really, really want. I know it’s easy for me to say, but don’t roll over on this, Raquel.

Please don’t take this wrong, @Marc Foster.  We’ve fallen into the trap of making loans to contractors with decades of construction experience but no flipping experience. Never again. I know you’re thinking otherwise, but because you can no doubt build or remodel a home cost-effectively, and I bet with your eyes closed, it doesn’t mean you also have the vision to flip a house. Protect yourself. Humility is the name of the game.

Many of the long-time, battle-hardened rehabbers we’ve been doing business with for years are wise enough to bring designers in before they even draw up plans or start construction. They realize that the designs they’ve been using for years are now obsolete and out of date.

Similarly, valuing a flip is always an art. It includes a construction cost component that you probably understand, and much else that you might not be used to, including ARV determination.

Our background with experienced contractors is that they are great at construction but not design and most think that because of their experience, they understand everything. They don’t. End buyers don’t care what went into the project – your forte. Design and price are near the top of what sells homes.

No offense, but anymore, we would consider you a newbie. Nonetheless, I have no doubt that you’ll find money. Just don’t think that because of your related, but not direct, experience your project is a slam dunk. Please understand that I’m not trying to be cynical, but helpful, based on our real-world experiences.

Profit splitting is not normally in your interest, @Anupam Banerji. You should run the numbers before you agree to anything like this. You’re not clear on what you’re doing, but assuming typical hard money rates of 11% interest only plus 2 points on a six-month flip, the lender will end up taking between 25% and 33% of the profit. With experience, these loan terms should be obtainable. Why would you give a lender more?

Unless your circumstances are extenuating, 50/50 profit splits or sharing —which you occasionally see house flippers offer here—make no sense. It makes even less sense to both borrow money and share profits. Who are you working for?

I don’t know what “… skin in the game but not the entire down payment,” means. If you're considering this because you don’t have enough for a down payment, you may be undercapitalized and might consider waiting until you're better funded.

Are you an underworld figure, @Sylvia Castellanos? In witness protection? Perhaps a CIA operative? These seem to be some extraordinary and expensive steps you’re going through to obtain something virtually no one needs. Honestly, I had to smile over the irony.

I’m not trying to be snarky but you’re jumping through hoops to secure anonymity, only to end up frustrated by the very companies that promise it—companies that, ironically, are shrouded in their own layers of privacy. If you're already this annoyed trying to work with them, imagine how anyone else will feel trying to do business with you.

Here's the simple truth: despite the glossy promises made by the law firms pushing this stuff, real, airtight privacy just doesn't exist. Try sending one of your attorneys into court to tell a judge, "Sorry, we're not disclosing who owns the LLC." How do you think that will work out?

Also worth noting—unless all your properties are located in Wyoming, your LLCs will have to register as foreign entities in every other state where the properties actually sit. That usually means disclosing ownership anyway—and paying for the extra fees and tax reporting.

I know many investors who are perfectly comfortable buying property in their own name. Most, however, form LLCs in the states where the properties are located, run their businesses with integrity (not implying you don’t), and carry adequate insurance.

Bottom line: in this day and age, there’s virtually no privacy that can’t be pierced. And anyone telling you the opposite is probably selling you something else, too. Don’t waste your time or money on this.

You’re making a common mistake, @Josiah Guyer. You are not paying $68k in fees. The $54k down payment is not a fee; it goes toward the purchase of your house and becomes equity when you close. It’s still your money.

You appear to be borrowing $161k ($215k – $54k). The remaining $14k for closing costs, points, and fees are expenses. Your points and fees are $7k/$161k, or 4.3%. This could be high but does not seem excessive. Similarly, $7k for closing costs sounds a bit high, but not extraordinary. Of course, this could be regional.

You need to shop around a bit instead of jumping to the last lender who financed your personal residence. Ask them to explain their charges individually so you can make relevant comparisons and avoid the wrong assumptions.

I disagree with some of the advice here. Since you're looking for non-conventional lenders, @Caitlyn Frizzelle, I assume you're seeking a business-purpose loan. Correct?

An NMLS registration is only required for consumer-purpose loans. Lenders who exclusively provide business-purpose loans—such as for buy-and-hold properties or flips—do not need to be registered with the NMLS. For example, we are licensed in CA, only make business-purpose loans, and are not required to be registered on the NMLS. Nor are we. (By the way, the NMLS is a registration portal, not a license. Jeeze.)

Unless a lender explicitly states that they also offer consumer-purpose loans, not being listed on the NMLS is not a red flag. It does not automatically indicate a scam.

Similarly, the Better Business Bureau (BBB) is not a reliable source. The organization has been widely criticized for favoring businesses that pay membership fees, leading to inflated ratings.

You didn’t mention which state the property is in. If it's in a state that requires a lending license—such as California—you should be able to verify the lender’s license. However, I don’t believe Ohio requires a license for business-purpose real estate loans, so this may not be helpful in your case.

Here’s the bottom line: No one here can give you a foolproof way to identify scammers as long as you're willing to borrow anonymously. LinkedIn, Facebook, Craigslist, Connected Investors, and most other online platforms are cesspools. Even the lender list on BiggerPockets isn’t vetted.

Change your approach. As private lenders who loan our own money, we don’t lend to anonymous borrowers — and you shouldn’t borrow that way. The safest way to lend and to borrow is through face-to-face relationships.

Local real estate clubs are your best bet. Here’s a Meetup link to real estate clubs in Toledo, OH. There are quite a few. When you attend, introduce yourself to the club owner and ask which lenders regularly attend and have the best reputations. Take a few out to lunch, ask informed questions, and build real relationships.

Never rely on online strangers to find your money, Caitlyn.

Urgency is often one of the first signs of a scam, @Kala Samuel. I know it’s easy to be cavalier over $15k, but why would you conduct business with a stranger for a property you haven’t seen?  How did you meet this person?

Don’t be blinded by the percent return. You will be taking your profit to the bank in dollars, and it won't be much. Note that a 20% return over 90 days is an 80% annualized rate. You didn’t provide the state in which the property is located, but unless there is an exemption, this loan would almost certainly be deemed usurious.

How are you verifying this person’s background? Though I agree with @Rick Pozos about obtaining title insurance, the title company will not completely vet your borrower or the property. This is on you.

I’m always leery here when an inexperienced lender accepts loan documents from their borrower. Who will review them to ensure they're enforceable? Who will handle the mortgage recording?

How did you confirm the $25k construction budget and why did she blow it in the first place? What if more is needed? How did you confirm the construction schedule?

Like any other real estate loan, ensure you are listed as the mortgagee on her fire and liability insurance policy.

Get a document indicating she intends to sell this property as part of her business. Verify that she or a family member will not be moving in, and clarify the use of the funds in writing. Your money should be wired to her business account if she has one.

Last, with her approval of the invoices, you should pay the contractor. Not her.