All Forum Posts by: Kevin Yoo

546 Galena Street, El Cajon, CA 92109
• 1,862 square foot single family home with 4beds/3baths and 11,200 square foot lot.
• Owner owes $293K ARM 6 month LIBOR currently 2.75% $1100/month payments.
• He has deeded the property to us in exchange for placing a kitchen into a second home he is moving to. The cost of kitchen is estimated to be $7,500.
• This home needs $80 to $100K rehab and is worth approximately $420K rehabbed.
• We want to put in only $50K to make it rent ready which should take 6 weeks.
• We will then place the property on the market for conventional sale, for sale with owner financing or for rent.
• San Diego has so few properties for sale or rent; we will easily rent or sell this home even with limited rehab.
• $50K rehab + $7,500 kitchen + finder’s fee + holding costs + legal fees = we need to raise $70K.
• The investor will be paid 8% preferred return and 50% of remaining profits.
• Our company will be paid 4% of amount raised after investor’s 8% and 50% of remaining profits.
• For a rehab of $50K and sales price of $420K over 4 months, the return for the investor will be $13K or 19% one time and 43% annualized and on amount invested.
• For sale with owner financing, we will only sell with high 30% down payment and higher price of $450K.
• For rent, we will only rent at top of market at $2300/month. Current market rents are about $2100.
• Investor will be placed on deed and the principal invested will be guaranteed by company and personally.
• The documents needed for investment will be drawn up by our attorney.
• Investments of less than $70K will be accepted.

Sorry about getting back to a thread I started myself but wanted to give update.

I have spoken to HM lender in San Diego, a real estate attorney well versed in usury laws, and even someone on BP who as a licensed realtor brokers deals for a fee (which I thought was very affordable.)

After all this I realized that the usury laws as all laws had good intentions but have consequences that are bad and idiotic. I just don't understand what the law does for me and my deal if after all the negotiations have been done by me, I simply turn it over to a broker to run it through escrow. I don't understand how a license simply makes the deal so safe when I went through a lot of effort on my own to protect everyone's interests.

I also realized that I simply cannot fight the law and must get a broker with a license to give it seal of approval. I have a licensed realtor on my payroll and will be using his license to broker the deals. He has never done that before but we will get him educated. I will also use appropriate documentation with my real estate attorney to protect everyone and be in compliance with rules and regulations.

As I did before, there are lot of us out there not compliant with usury laws of our states. It is akin to rehabbing with unlicensed contractors which I just simply do not do. It is akin to driving over the speed limit where only a few of us get caught.

Thanks for everyone's input.

Troy,

I too live and invest in San Diego. Let me know if you need any help.

Roy N.
You are welcome.

Roy N. I promised to share with you my experience raising private money. So, I needed to raise $200K+ for an excellent deal that was brought to me by a rehabber with whom I had already invested quite a bit of money with good returns. I typically do not fund but $50K into one deal at a time. So, I decided to raise this money from private investors whom I know. I put together the deal in an informative letter with all terms clearly outlined. I communicated with several of the PM lenders and answered all their questions. I sent out the letter on Friday of this past week and by Monday I had well over $300K+ raised where I had to turn away several investors.

Lesson learned. It is all in the presentation. And you have to build up the trust. The PM investors were people I either had invested with or personally met and told them what I do. Three of those guys I met right here on BP. In the end we did not do the deal because it got wholesaled to a developer. But the whole experience reinforced the notion that a good deal always finds money. It was such a positive experience we are consulting with a local hard money lender and attorneys to start a PM lending business.

Just wanted to share with you my experience. If you want to see the details of this particular deal, visit my blog.

Amir Levi I know that the usury law applies when the money is lent from one private individual to another private individual. But I thought that if your lending company lends to a rehabbing company that the usury law does not apply. Is this not true?

Amir Levi How can I have a licensed broker negotiate and arrange all my deals? I negotiate and arrange all my deals myself and I am not licensed. I am sure many of the CA BP members are not licensed either. And if I keep all my deals under 10%, I am a very cheap lender that will lose out on a lot of higher return deals. Where do I go to find a broker who will put their license on the line, know what it means to be an investor, and negotiate effectively on my deals?

Glenn Espinosa I do very close to 30% PM and 70% HML.

Brian Burke My understanding of usury law is that the exceptions apply if you lend to a corporation. And so if I lend to a corporation of a rehabber then I can charge more than 10%. Have I misunderstood the laws?

Derek Petersen

My properties are 4759-61 Alaska and 3501 Iowa. Both are in St. Louis MO 63111. I wonder how much difference there is between your area and mine.

I am currently using my own money to buy, hold, and sell all over the country.
I am in the process of raising Private Money to do more deals where ever I can find good ones.

I would like to hear from those who are currently doing this to see how to do this properly. What rules and regulations did you have to follow? What kind of entities did you use to structure such investing? Can you buy properties and also lend out this PM?

I will be meeting with attorneys and CPAs this week to discuss this with them but wanted to hear from others who have already blazed this path.

I currently fund my California fix and flips with a mixture of Hard Money and Private Money. I create a promissory note for the PM and record it as a second lien against the property.

With the current requirement in California that a broker must do real estate loans, can someone instruct me on how to do this properly? Are the following steps correct.

1. I find a deal and present it to PM.
2. I find a broker and give him the promissory note that I have created.
3. I sign it, the PM signs it, and the broker signs it. Is this correct.
4. I then pay the broker a fee. Is this correct and how much?

What happens if I don't do this with a broker?