All Forum Posts by: Account Closed

You need to find out if there is an existing lien on the property. Something that size was probably financed. If that is the case, you will need to get comfortable in a 2nd lien position (and make sure the first will allow). Check with your attorney, but an LLC may work best, allowing you and the other investors to all lend through one entity.

Move out. If it is not owner occupied, an HML will do that (if they get comfortable with the low loan amount).

A hard money loan is probably your best bet.  Quick execution, fewer hoops to jump through compared to banks.  Traditional lenders typically won't finance your rehab costs, so depending on how much equity you are willing to put in, HMLs are the way to go.  Bear in mind, these are usually short-term loans and you will need to sell or refinance with a traditional lender once the repairs are complete, depending on your strategy.

In some respects, investing in land is easy, but in other ways it can be trickier than buying income producing assets.  First off, keep in mind that land is not income producing and, if you do it right, it is not a passive investment.  Know why you are buying a particular piece of property.  What is the highest and best use?  (subdivision, industrial, retail, office, etc.)  Then, compare that to the existing entitlements and if they don't match up, learn what it will take to get the entitlements you need.  You will also want to carefully review title and survey to make sure there are no existing encumbrances that will negatively affect the use of the property.  Make sure you budget for future expenses during your hold, including taxes, insurance, legal, engineering, etc.  If you are buying a large parcel and plan on selling off individual lots, you will typically have to plat the site and bring utilities and access to the piece you are selling.

I hear stories all the time of people buying a piece of land and finding out after the fact they can't use it for what they envisioned.  It's a lot cheaper to do your homework before you buy.

Hire an attorney.  You definitely want to make sure you are in a first lien position.  In Texas, you would have a note and deed of trust (plus a few ancillary documents).  You will also want a mortgagee title policy to make sure you are getting clean title (as lender).  Beyond that, do your normal deal due diligence.

If you have exhausted the friends and family list, next step would be to find brokers active in the market and property type.  They will know the players (sponsors, lenders, investors) who are active in your type of deal.  There will be a fee depending on what you are looking for, exactly, but if it is a viable deal, you shouldn't let that scare you.

Definitely something to discuss with your attorney, but my initial thought is that you should structure an entity to be the lender and have all investors be partners or members of that entity. SEC requirements may kick in if you are using unaccredited investors. As to whether an LLC or LP (or some other form) would work better, that will depend on local tax laws.

Might start off with a flip or two to build a story of success and slowly change over to the buy and hold model.  This will allow you to churn your money and build up a little more cash while also showing that you know what you are doing.

Ideally, you would subdivide the property so you could have two legally platted lots.  The reverse mortgage likely keeps that from happening.  If you are paying off the reverse when you purchase it from him, you could possibly get bank financing, but without the property being subdivided, the bank will take a lien on the entire property, including the existing house.  This will also create issues when it comes time to sell, as it will create an "all or nothing" situation.

I tend to agree with the others. Timing is sometimes the most important factor when using a HML. While I don't like to, I have the ability to do a deal in a matter of days. Banks can't do that, and it can be the difference between winning a losing a deal.