All Forum Posts by: George Despotopoulos

Hi @Richard P. there are private lenders (individuals lending their own money through an entity or in their personal capacity) and there are also non-bank direct lenders (financing companies). @John Thedford made some good points. Although, I would say, many financing companies, like some traditional lenders/banks, charge an application fee. Usually this is around $299 - $500, depending on the institution (most I believe would be around $299-$399). This application fee covers the underwriting of your loan (and includes the credit report, valuations, underwriter's time, background check, etc.).  I believe John is saying (correct me if I'm wrong John) is that you should never pay a lender who says they need the origination fee upfront and I agree with that 100%. The origination fee is usually anywhere from 1.5% - 2.5% of your loan amount. It also should be earned by the lender ONLY IF your loan is funded and closed. 

Although, definitely do your homework and do not pay a lender an application fee without first establishing 1) that they are legitimate and 2) in what circumstances that application fee is refundable. 

Most financing companies will fund 70%-75% of the purchase price (or 70% LTV of the refi based on the property's appraised value) and give you a longer term (can be anywhere from 10 yrs to 30 yrs depending on their loan program). The interest rates will range from 7% - 9.5%.

If you want short-term capital (usually 12 months) then the rates are a bit higher in the 10% - 14% range. The origination fee will usually be from 2% - 4%. The benefits to short term loans are that they are interest-only payments, with the principal due at maturity, you can close quicker, FICO isn't much of a concern, you can get 80% LTV, and there is no prepayment penalty. The negatives are the high rate, high fee, and short duration.

Happy to answer any follow-up questions!

I agree with @Harjeet Bhatti. There are 'private' lenders & non-bank direct lenders that will look at loans on a case by case basis and have the ability to assess the litigation and risk to your unit. The rates will be similar to what you stated (generally 7%-8.5%) but may be a bit more restrictive here given the active litigation. This means they may lower their max LTV to account for the circumstances.

It really depends on where the rental is located, the nature of the litigation, and what you're trying to pull out and what for.

Hi @Ben Schofield; what is the property's value? If it's above $75k it makes things easier for you and gives you more options.

The first step would be speaking to a local community bank/portfolio lender. If you do not options through those entities, then private lenders or non-bank direct lenders (offering long term financing on a rental property) would be your best bet.

Adam, 100% LTV at 6% and unsecured?!

Those terms don't really add up! 

Most private or hard money lenders will go up to is usually 70% - 80%, which depends upon your loan amount and experience as an RE investor. 

I really wouldn't pursue this further.

Like most said, you need to be prepared for the worst case scenario of a foreclosure...but that's dependent on the property's jurisdiction. There are states, like TX for example, where 'retrieving' an investment property is a bit more streamlined and less cost intensive than say New York. This comes down to whether it's either a judicial foreclosure or nonjudicial foreclosure state-- in the end it's a foreclosure sale, but the path to get there is key and in nonjudicial states it's usually easier. Also, some states have remedies not available in other states, that makes getting to a resolution easier/quicker, even in a judicial foreclosure state. An experienced attorney, licensed in the property's jurisdiction should be able to advise. Your attorney will also advise on the appropriate interest rate, default rate, late fee penalty, late payment penalty, and so forth as this is not standard across the USA.

You also need to know how to analyze deals of this nature and make sure you're OK with having that cash tied up for the loan's term. Usually if something is too good to be true, it's because it is. If someone is willing to pay 20% interest on a loan, I would really wonder why that is. Are you able to pull credit? Can you do a background check? These are things I'd want to do if I were lending my money.

Yikes! I'm sorry to hear this @Joe Won! Have you tried doing what @David Weintraub suggested and have LH contact the seller? Maybe that will help. You can always agree to modify any purchase agreement and extend for another X days. 

Usually the decision & ordering of an appraisal happens right at the start, unfortunate there was some sort of mix-up here. As long as you close; LH definitely has the funds!

Wow! That's great to hear, congrats! 

The minimum loan amount is usually $50K. If you're getting a loan under $100K, then expect to put at least 30% down. If the loan you're getting from the lender is over $100K, then you'll most likely be required to put 25% down. Some fluctuate 5%-10% in either direction, but it's not to common on sub-$100K, those usually require a higher downpayment b/c there's more risk for the lender. 

Yes, some do care about your liquidity or cash on hand, which they refer to as a minimum liquidity requirement. That can be anywhere between 3 or 6 months of loan payment depending on the lender.

Usually if you need to do some repairs, you should be looking @ a bridge loan or a hard money loan. What you do is, find a property, figure out what repair work is needed, get some sort of plan together for the rehab and reach out to a hard money lender.  If all looks good, they'll lend you money for the rehab. Once you get the renters in place you can go to the "in between" lender and do a rate-term refinance for more favorable terms.

Dang Denis! That's a tough one. Not many out there originating loans below $50K. You'll have to do a lot of grinding to find someone willing to lend 80% LTV, again, especially under $50K... Check out the marketplace section of the website.

LLC as the borrower shouldn't be much of a problem; but expect to be a personal guarantor on the loan docs (and any member of the LLC may be required to be a personal guarantor as well).

I would keep asking around and put it out there. I don't know what terms you'll get for a sub-$50K @ 80% LTV but I'm assuming it'll be high fees/rates to make it worth it for the lender -- unless you can get a friend/fam to do it. Otherwise, you may as well look for an equity partner to do these types of deals if you can't self-fund them.

If your debt to income is an issue, I would start looking at portfolio lenders, non-bank lenders, private lenders, and hard money lenders.

If you have great credit and have some experience you should be on the lower end of their rates. 

Many non-bank lenders cash out @ 70% of LTV.