All Forum Posts by: George Despotopoulos

Hi @Julian Buick 

Can you cite/link to where I stated that "private lenders have seasoning requirements for lending on refi's and they are not as strict as a hard money lender's seasoning requirements." I think it's unfair to make a claim w/o substantiating it. I generally do not speak in absolutes, especially in lending or law, as both are fact-specific and vary depending on the parties or circumstances involved. If you saw something I said somewhere else on BP it would be more fair to address/challenge this statement there in that other post. Not merely claim I said it here where no one can verify it's basis. 

Also, you did not provide information or a source about needing a license to advertise being a lender like you mentioned in a previous comment. (you said: "But if they advertised that they lend money they would need to have a license.")

Private lenders, or rather non-bank, or non-traditional, direct lenders (although, please note, many individuals on this forum and elsewhere refer to lending companies such as Lima One, B2R, Lending One, etc., as private lenders,) typically have much more stringent requirements than hard money. 

Seasoning requirements and hard money is uncommon; not many people are looking to do a rate/term refi w/ hard money, that wouldn't make sense unless you started off with a rate greater than 14% and term of only 6 months and you're looking to for whatever reason go to 12 months and 12% (hypothetically speaking but again that does not make much practical sense)....Also, you also don't come across many borrowers looking to cash-out w/ hard money, the rates on cash-outs are typically higher than purchase money loans or rate/term refis, combining a cash-out with hard money would result typically in a high rate, high fees, and short term.  So seasoning requirements rarely come into play with hard money. And given that hard money traditionally is based on the asset only, with less stringent requirements, and the goal is to fund quick, it's hard to see a situation where obtaining hard money would have more requirements, in general not only as it relates to seasoning, than a private lender or non-bank direct lender. 

You stated: "Private lenders can and will have their own underwriting requirements based on the sophistication of the individual. There is no rule that says private lenders rates will be somewhere between conventional and hard money. You just made that up too."

Private lenders can have their own requirements, as can hard money lenders, or any non-traditional non-bank  direct lender, as long as it doesn't run afoul of state/federal statutes and regulations. I never stated there are rules across the board or rules that private lenders or non-bank lenders must follow/implement. In fact, I always preface anything I say with that my experience/opinion/comment is applicable to non-bank/non-traditional lending & non-owner occupied investment property space and that rates/terms vary b/w lenders. And I do add that there are general standards/requirements from lending companies, like the ones mentioned previously, and that typically a potential borrower would be see rates in a certain range. 

I think you're running afoul giving advice that may put some lenders at risk when you say, "On the other end of the spectrum they can charge 24% or higher interest, it's definitely not uncommon." Usury laws have long existed restricting the amount of interest that may be charged for money loans, particularly “private” loans made outside of the traditional banking establishments. If a loan exceeds the maximum criminal usury rate, the lender may be prosecuted for committing a felony. This is state specific and I know in certain states 24% or more would be considered excessive. 

"I'm guessing that the rates that you are throwing out there for these "private lending companies" are actually the rates that your company, a hard money lending company, charges and refers to it as a private money loan. Either way, it seems like you are trying to promote your services, which is fine, I see people do it on the forums all the time. It's just not really allowed is all."

I do not promote anywhere on these forums, not even in the marketplace, so this is your assumption and interpretation of my post(s). I think this may be stemming from the fact that you are a private lender and have taken issue with my use of the wording "private lending companies" or "private lender" in general. And further, perhaps the rate range I mention that typical lenders give in this space may be coming below what you offer to borrowers?

Not here to combat users or put down others, only want to foster growth and further provide info for other users. I am happy to discuss/debate issues and questions or field challenges about things I've said. Not interested in what is essentially unsubstantiated claims. If you see something I post elsewhere that you disagree with I suggest addressing it in that threat/post, not attacking it elsewhere. I'm fairly active here and my posting history is extensive. Not many people have the time or care to go through to find what you're referring to and validate whether it's accurate or not. It's  unfair and comes off as inflammatory. 

Roberto, 12 month loan terms are reserved for hard money or bridge loans. These are primarily for fix and flips or buy/rehab projects. They're usually not 18 months from the start. It's 12 moths and then lenders allow for one or two extensions for a fee. Hard money usually doesn't have prepayment penalties so you can use this to brrrr. You'd get a hard money loan at a high rate, do some work to the property where appropriate, get higher rents, hopefully increase your equity and do a cash-out refi to pull some money for your next deal. 

Not many lenders will offer you rental property financing at 24-36 months. Most start at 10 year terms, 30 year amortization. 

There are non-traditional lenders that may entertain a 3 year term but rates won't be in the mid to high 6% and these lenders may also have prepayment penalties.  

Again this is strictly speaking of non-bank lenders dealing with non-owner occupied investment properties. 

Hi @Julian Buick -- There can be private lenders who are in fact private lenders offering rates in between traditional lenders and hard money lenders. Where a hard money lender usually starts at 10%, a private lender may offer rates as low as 6.5%.  To say private lenders use that term because it sounds more appealing may be true but that is a broad and general statement. You can tell the difference if you're dealing with a hard money lender or private lender within 30 seconds of speaking about their rates/terms/fees. I do not know how successful such a practice of mislabeling yourself as a private lender would then be. They are two completely distinct and separate categories.

With regard to needing a license to advertise, could you provide more information on that or cite to a source for this. In many states you do not need a license to lend $50,000, and up, on non-owner occupied residential real estate. Most hard money and private lenders operate in that space. It would seem counter-intuitive that you need a license to advertise in such a state.

Hey Rob, 

Finding good loans to make is all about your network, your underwriting criteria/guidelines, your understanding of the market, and hustling. Brokers can help you as well. 

You need to worry about a lot more than just usury laws. Your docs should be adequate enough to withstand any challenge down the line or you risk losing your investment. 

Common pitfalls are poor underwriting, poor risk assessment, being over zealous, sacrificing prudent lending practice to gain an edge on competitors, no take-out for you loans, lack of available capital, over-promising borrowers and not delivering, improper loan documents or the absence of material docs. 

Rates are determined by the lender and each base them on the market, their knowledge/know-how, and their underwriting guidelines/rate matrix.

PML and HML are two different types of loans/lending programs. Each present a unique set of circumstances and criteria. Each have differences in their loan docs and the law.

Hey @Greg Weber 

Chris is spot on above. You could definitely look to HML (hard money lenders). You may also qualify for private lenders as well. Even if your foreclosure was listed for 2014 you would still be eligible for financing as many private money lenders have a 2 year requirements (some have 3-5 but there are those lending with less).

720 is a solid FICO. If you have any rental property experience and have owned a number of rental properties, that will help your cause. Nonetheless, even if you haven't, that will not preclude you from being eligible. Rates for private money (reserved for longer term loans/rental property financing) usually are 7% - 9.9%, 10 - 30 year terms, and origination fees of 1.5% - 2.5%. With rental property loans, your personal income does not play a factor. The loan process is focused on the rental property's income. 

For hard money expect rates 10% - 15%, origination fee of 2.5% - 5%. 12 month terms, extendable usually to 18 months for a point. You can use hard money for a rental property loan. Usually this would be a bridge loan that you would be able to refinance into a longer rental property loan once you get higher rents/tenants in place. 

Hi Ben, commercial lenders, and private lenders, underwrite the loan based on the rental property's income and attributes. They then look to you as the borrower/investor and underwrite to your FICO, rental property ownership/management experience, the number of rental properties you have owned, and your cash reserves (look to assets/liabilities/recent bank statements, etc). These are the most important factors in this space of lending. 

Even if you 0 experience managing rental properties or have owned 0 rental properties, a lender should still qualify you based on the other factors, especially if the property's rental income will be high (DSCR 1.25x or greater) and your FICO score is solid (above 700). You may have been speaking to a lender that either holds onto their loans or a very conservative lender.

Hi Roberto, if you're talking private lending companies, usually rates are anywhere between 7% - 9.9%. The terms vary some offer 10 year while others 30 year. On average investor either refinances or sells the property 7-8 years.

There are interest only options out there, usually it's 3 years, the rates will be higher. These would be 9% - 10%, perhaps higher as you're nearing hard money territory (usually 12 - 18 month terms). 

Private individuals also lend but their rates/terms are all over the place.

Carly, I'm assuming you're looking/qualify for traditional lenders. For investment financing, and on the traditional/bank side, local/community banks, portfolio lenders, and commercial lenders are your best bet. I would do specific searches for your location and just get a list together. The best way to go about this is by posting/researching on BP and cold-calling these lenders to feel them out. 

If you're not seeking conventional financing, private lenders are another option. The rates are higher (7% - 9.9% for rental property loans) but the focus is not on DTI or your personal income, it's on the rental property's income. These lenders usually close quicker and can be a bit more efficient/easy to work with. That varies of course!

Hey Dan, you're correct in that you'll probably need to cover some costs associated with the cash-out.

Hi Tony, hard money usually does not have anything to do with your personal income. Underwriting is focused on the hard asset (the property). If you're getting 80% LTC that is standard to an extent; although this is a smaller sized loan. 

16% interest rate is rather high. But, are you paying any points at closing for the origination fee?

You, as the buyer, paying for title is standard. You can always chose the title company.