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All Forum Posts by: Bill Gulley

Bill Gulley has started 163 posts and replied 19766 times.

Post: Owner Co-Signing Mortgage So I purchase their house? Good/Bad?

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

What your seller is suggesting is illegal, I suggest you run away not walk. Called mortgage fraud and that's on you! 

You don't even know if the property is compliant with building codes and zoning so that's another run, don't walk.

Sounds to me like this seller who is dreaming up ways for him to get his hands on cash is the wolf and you're the lamb. 

Concentrate on school, don't screw up your life trying to get into RE investing with wheeler dealers or gurus, finance laws can take a very big bite out of you! Good luck in school! :)

Post: PROBLEM : Need 60k for property worth 147k. RENT TO OWN

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

Ken's suggestion is applicable if you are an owner occupant buying, if this is a rental you've got a problem, sell it!

You might see a good RE/Finance attorney, your Lease-Purchase is an installment contract, you were also allowed to rehab (should not have done that on your type of contract), but you have money and equity established. My bet is that, if you're living there,your contract is in violation of Dodd-Frank, an attorney can help force new financing long term or nullify the deal  giving you the property or a sale to obtain your equity, lots of ways to go as an owner occupied buyer. 

If your deal was commercially based, then sell the place under your installment contract. A closing agent may treat your contract as a financing contract for you to sell and payoff. 

Good luck :)  

Post: Are Lease Option and Seller Finance valid investing tools?

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

@Jung-woong Han

You really need to go to my posts on BP concerning these topics, the information you get in a public forum with "investors" will be wrong 50% to 90% of the time, like Christine's post.

But first, you need to learn the basics of real estate, that's not on BP! 

Your comment about 20% profit is scary,  when you're not improving a property, the value is not arbitrary or just sold like a shirt, the market sets the price in real estate,  not the seller. 

If you set a price too high and arrange for the buyer to buy it in any manner without an appraisal, you're entering predatory dealing issues as well as violation of Dodd-Frank most likely. If you buy a property 25% below it's true value, you're stealing equity from some little old lady, so again you are predatory. 

SLOs are very difficult to pull off for any newbie, and you must have money to back up your obligations to your seller when your tenant takes off, they will take off on you. These are not good arrangements in reality.

L/Os are fine for you to buy as an investor, non-owner occupied or commercial properties.

Seller financing is a very good way for investors to buy, or to sell to other investors, due to Dodd-Frank you need to avoid seller financing with selling to a home buyer. 

All of these strategies fall under installment sale contracts, speak to an account/CPA about tax ramifications! 

Seller financing is different than underwriting a conventional loan, it takes experience in originating such loans and the question to ask is not how many deals someone did, but how many deals ended up being successfully closed with the loan paid as agreed, paid off and title transferred ! I don't know of any good underwriters on BP.  Over 90% of my SF deals ended up closing as mentioned, that also took my mortgage company to make them successful with loan servicing and funding, so it's not really a paint by numbers thing for investors.  You have to understand the end target before you can devise a means to  hit the target!

Good luck :)  

Post: Private Lending vs Hard Money

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

Haha Jeff, pretty much what I suspected, the initial contact from your well know idiot borrowers probably didn't meet the "known to you" aspect, sooooo, repeat customers don't make it "private".

As I mentioned, all the aspects must be met, your own money is irrelevant as you're in "the business of" lending, you even advertise in your signature.....

BTW, a real estate attorney is most likely one of the last people to properly advise in the financial and securities arena, finance is not real estate.  

Otherwise, humorous .

Nothing was said about a private lender not having to follow finance laws that are applicable, just not as to registration and licensing, if they qualify. 

Not sure how many lenders we have here and what their self education in compliance has taught them, we'll see how many finance examiners or finance attorneys respond......   hope this is short  enough.......  :)   

Post: Kick Out Clause- insights anyone?

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

Counter back with the financing contingency and use the appraisal at or above the sale price as you're concerned it won't appraise out and the seller needs to cross his fingers! :) 

Post: Seeking Smart, Trusted Private Lending Partner

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

Jill, your asking for a "Hard Money Lender" not a "private lender who is known to you. 

If we have any money folks here, they need to take care in answering solicitations and lending from advertising, they need to be an HML, not an exempt private Joe.

Not an endorsement, but @John Thedford is in your neck  of the woods, I bet he is compliant and I really doubt he would be predatory, in other words, a straight shooter, I'd give him a call if I were you.  :)

Post: Trump's plan changes the pass-through nature of an LLC?

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

Crazy politics, don't pay any attention to the man behind the curtain! 

It's a good thing that we have 3 branches of government, "proposed" is not reality! :) 

Post: Private Lending Contract

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

Glen, yes, see an attorney, but an easier way, just go do your thing with your friend, he holds his money but must be able to fund the loan.

When you find the property to buy you'll go to closing.

Tell the settlement/closing agent you need a promissory note and deed of trust for settlement.

Have your friend give the agent his proper name, SSN, address, where payments are to be sent  and the terms of he loan, (like 30 year amortization 5 yr. balloon, whatever). 

He will deposit his funds with the settlement agent in escrow.

When you close you'll make the note and deed of trust or mortgage as required, give it back to the agent and they will file it for record and the copy or original (depending on local requirements) will be sent back to him. You don't do anything but sign it. 

Then pay as agreed. 

You can ask a title company for a copy of the note and deed of trust prior to settlement to review, both of you can look it over before closing. 

A title company will charge you, from their attorney, but it will probably be much less than going to your attorney for a simple boiler plate form where they just fill in the blanks. 

This is for a standard note, now if you go nuts with odd terms, like interest only, scheduled principle payments quarterly and adjustable rates, you'll need the title company to have a custom note made...$$$, so, keep it simple. 

Let the title company take care of it and your deal,  transaction and settlement will be insured by your title coverage. Good luck :)    

Post: Private Lending vs Hard Money

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

Amused by post #1 and others! :))

Definitions do exist in the regulatory world of finance, a private lender is based on the exemptions in the Securities Act and banking regulations as to the type of lending that may be accomplished without regulatory oversight or compliance with institutional requirements.

A private lender must conduct their lending activities within the scope of the exemptions, if they do not then they default to another lending status, usually to a broker or a lender lending to the public.

All of the exemptions must be met to identify a private lending status or activity;

Personally Known: 

This includes family members, persons known by the lender through past social or business dealings and the past interaction of the parties must be significant, not just someone you met last week at an investor club meeting.  Business partners are exempt lender/borrowers or where you have a small enterprise (usually 3 or fewer parties) with a common business goal.

This can be tricky for a lender when they create an obligation to a business entity or Trust, as all natural persons involved should be known, however a private lender may lend to one other party who is unknown to them when the know party introduces that unknown party and those parties have a relationship. 

Example: John is a long time friend and he has done work for me. He asks me to lend him $100,000 to he and his wife who I never met. This is fine to do. Or, if John had a deal with Bob who I never met, so long as John and Bob are using my money for a common cause between them, I can lend as a private lender. 

Now, if John wanted me to loan the money to his hunting club with 30 member, this is not a private lending arrangement.

Your Own Money:

Funds to  be loaned must be from the lender's own personal funds. Funds may not be borrowed from any source to fund the loan! A slight cloud to this is if I refinanced my home, got cash out, then later used my money to lend I could do so. Note that the money was created from my personal assets, it went to me , was deposited, then I funded a loan. Loan funds were not leveraged by debt created to fund my new loan! (This is a brokerage activity.)

Example: I have a securities portfolio, a little over $2.5 M, I want to fund a few loans to people I have done business with in the past. I can sell some stock and obtain cash to loan out. I can not borrow "against the box" or my account to fund my loans as that would be borrowed funds leveraged for lending activities. 

Another source which is not allowed as a private lender is "hypothecation" using one note that was funded as collateral for a new loan to fund another loan, again this is a banking and brokerage activity. 

Source of funds is an important aspect in meeting exemptions from financial compliance! Borrowing money to fund lending operations becomes a regulated lending activity regardless of how much is borrowed or how big or small a loan might be. 

Your own money pretty much means your cash sitting in your personal account. Yes,  you could take capital, owner's equity from a business account but I'd suggest you wash it through your personal account because of the next requirement.

A Natural Person:

The lender must be a natural person or their Trust. Any business entity that creates loans is not a private lender, not saying a business can't make a loan but it's not a private lending activity exempt from regulations which may apply. 

Income & Activity:

The income created from lending activities cannot be a significant part of total income, going over 50% will place you in the business of an activity, this is viewed in light of IRS business income just as any small operation or hobby type activity. The key word however is "significant" I'd say stay under 25% of other income, you don't want to be identified as an unregulated lender out of compliance and in the business of lending.

Advertising:

Lastly, a private exempt lender may not advertise, they may not offer loans publicly, which includes speaking to some group of real estate investors.  A private lender has no business having a business card that suggests they make loans! You're getting into the business of lending by advertising.

An HML is anyone who does not meet the exemptions and generally are asset based lenders, not so much credit lenders.

Understand that a promissory note is a security subject to securities laws with exceptions that are overlaid by banking and finance law or regulation. 

These basic exceptions also apply to note sellers and buyers, note investors, you can act personally with your money for your personal portfolio but if you are "in the business of" then you are getting into a brokerage activity.

I won't say that the lender's matrix above is pure hog wash, but it is not close to accurate. 

The main difference between an HML and a private lender is that one is exempt and the other isn't, one is in the business, the other is not.

Loan amounts and interest rates are irrelevant nor is the collateral taken under a loan. Collateral becomes most relevant under Dodd-Frank and defining types of lenders. 

Points are pre-paid interest! Paying points up front or pre-paid is a brokerage activity,  not a private lending activity. Only regulated or registered lenders in the business of lending may legally charge points, Grandma does not.        

Thanks to the OP for the great title making this thread searchable for others. 

Now, you can heed my advice or dismiss it, I suggest you heed the warning. Stepping out of place as a lender can send you to prison in extreme operations but at the least you can lose your note, collateral and money (usually you'll have a fine as well). 

This information comes through the SEC and finance regulations, various parts, various Acts, it's not in one paragraph so don't even ask. You will find most of this in the SEC Regs as mentioned and you'll need to pay attention to  the applicability of law and regulation to arrive at the differences between lenders and thos who may be exempt from certain activities. Good luck!  :)

Post: Lease Options - Questions

Bill Gulley#3 Guru, Book, & Course Reviews ContributorPosted
  • Investor, Entrepreneur, Educator
  • Springfield, MO
  • Posts 21,918
  • Votes 12,880

I see this over 2 year old thread was bumped, things have changed with options and this thread is not  current! Specifically about taxes, installment purchases, accounting for options with a term greater than 12 months. 

Leases and options are sold generally in commercial activities, it's not really a small operator's ploy.  There are specialized investors who buy and better yet, "finance" leases. Options can be sold as well, most common is with a commercial tenant who holds an option and sells to another tenant if the option was properly drafted. 

Look up the term "in the money" with options, that is when the option becomes an asset and marketable by the holder.

Again, you are in violation of tax law requiring any residential tenant to perform maintenance or make repairs, only a commercial tenant may do such things! Option or no option, doesn't matter. :)