All Forum Posts by: Paul Altman

I agree with kicking her out, when you get a pet and live in rentals you assume the possibility of having a harder time finding a place to live. Its not the problem of the landlord that someone decides to get a pet. If you own a rental property in high demand area and know that you will be able to rent it out to someone else easily, why not do that and get someone that not only won't have a pet that could leave the stench of urine behind once they are gone, but at the same time get someone that doesn't lie and try to sneak around what they agreed to on the lease agreement.

Its not that landlords "think of pets as a chair" its that landlords think of their rentals as investments that they are trying to preserve as long as possible so it can continue to maximize its profit bc thats the reason the landlord bought it in the first place, to mke money.

Great thanks. I figured it would be expected that the borrower has some money in the deal.

I am actually the lender in my situation and am considering lending the entire amount needed for the project which I know many investors would advise against but I figure you can minimize a lot of the risk if you do due diligence and really make sure you only lend on these terms if the deal is very solid.

Still might be advised against even with a great deal.

Hi

I know a lot of HM or PM lenders will not lend more than a certain percentage of a propertys current value (I've heard 65-70%) to someone looking for funds to rehab a house. I understand they do this to have a better chance of recouping their money incase the borrower falls through and have to sell the house but I am curious about how borrowers typically find the additional money to fill in the 30-35% as well as the rehab costs they couldn't get from the primary lender.

Are the borrowers expected to have some of their own funds to contribute to the deal or is it standard for them to find other lenders to fill in the rest of the needed capital? Thanks

Thanks @Bill Gulley I think I would be more comfortable in that type of situation.

Do any of you guys have any recommendations for a good attorney that specializes in private lending?

Thanks

@Jeff S.

I have never done this before which is why, in addition to seeking advice form an attorney, I am also trying to learn from others who have experience in these situations. I did not say "these are the terms that I demand from a partner" as a matter of fact these are the terms that the potential partner drew up himself for the deal. So i dont believe saying someone is greedy is accurate when that person doesnt know "the ropes" of private lending and is simply here to get advice and learn from what others know from their experiences. So with that said I do not know what is considered greedy or not greedy.

From researching companies and individuals that use private lending from investors to deal in real estate, I have noticed that in a lot of cases they provide a 10-12% interest rate on your money. I do not think that is "smaller money" never said that, I was saying that 10-12% is likely smaller than what others were suggesting I make on my money, which was 50% or more of the profit. So what I was curious about is why do some investors accept that 10-12% on a their money and why do others suggest making 50% of a profit. In my case I am funding 100% percent of the deal as a partner and not really taking on many if any of the project duties and will have my name on the deed of trust, so why would I be entitled more than 10-12% bc the situation is very similar to a situation where i wasnt a partner but just a private lender?

Maybe others were just suggesting I take 50% in the case that I WAS involved in the project duties as a partner but considering im not maybe I should just act separately and not as a partner and just lend but again, I dont know because never done it before.

Also, because I dont know anything about private lending, I didnt know the prevailing rate is higher than 10-12% bc I thought usury laws stated that you couldnt charge more than that.

Also I would be a little weary of someone who had resentment towards making payments to someone else who lent them the money they probably didnt have themselves and is now able to potentially benefit and make a profit from that lender. I would think it wouldnt matter how much money was lent, that lender is making it possible for that borrower to be involved in the deal in the first place and the borrower would most likely know those terms before going into it and if didnt like then could not take part in the deal or find another lender.

I am just trying to understand how things should be structured in different types of scenarios, how you should protect yourself in these scenarios, and what is considered fair or not fair.

@Ann Bellamy : Thanks for your response. I am definitely not attempting to draw up my own agreements, I will be getting an attorney to do that. I have just been talking to a couple different attorney to see who seems to be the most qualified on private lending matters and havent gotten detailed responses from them so am still searching for one that I'm convinced is the right one to do so.

@Eric Michaels : One thing I have been confused about in lending on the real estate projects is that I know that many passive investors will simply lend money to rehabbers for smaller 10%-12% interest rate (which isnt small at all when compared to what you make on your money from many other investments). I know in a lot of these cases they arent funding 100% of the deal but they are still most of the time risking a considerable amount of money so I dont understand why those investments exist and then in other situations its not acceptable to not get at least 50% profit on the entire deal.

I dont really see a fair comparison between a one time real estate deal against hedge fund managers making no more than 25%, they are making 25% of a substantially larger amount of money when compared to the profit of lets say $50K from a one time deal with a lender on a rehab. I dont think a lot of rehabbers would find it even worth their time for such small profit ownership especially to the maximum of a 95% cut to the lender that you mentioned. If we are comparing a small real estate lending deal to larger scale real life investments then why dont conventional banks charge more to borrowers than what they do (4%-7%).

Im my case the other party in the deal finds the deals, manages and markets the project.

@Jeff S I figured that having an interest rate that the other party is responsible for paying over time as long as the money is still out there will keep them motivated to complete the job as fast as possible knowing they have that financial obligation and money they lose out on the longer they take to complete the project. That would be my reasoning for not just doing a straight up profit split bc there isnt as much of a sense of urgency.

@Karen Margrave Actually my numbers agree with what you are saying and side more so with @David Beard . Yes I am asking for a rate and profit split but it would still most likely work out to be at or less than 50%. You are right I dont think I would ever agree to a %25 profit split as a rehabber unless the potential profit was very large considering that your profit on a smaller deal could easily be eaten up by unforeseen surprise fixes.

Thanks for all your advice. Good to hear your feedback.

@Faith Brashear @Ann Bellamy @Karen Margrave

Thanks to you all for the advice. I have talked with real estate attorneys but havent gotten to much in the way of detailed advice and how to draw up agreements etc so will take your advice of trying to find one familiar with private lending.

I will definitely make sure I am in first position on the deed but do you see anything wrong with having the deed in my name but placing the property into the other investors LLC that i am not an owner on?

Hi

I am considering loaning money in a situation where I would be getting 35-40% of the profit and also a preferred interest rate on my money. This would more so be a partner situation so not lending to strictly a borrower.

I would be funding the entire project which would come out to around $175k - $200k including purchase and repairs.

I have never lent private money before and would appreciate some advice from some of you guys out there with experience in this area.

Just want a quick explanation of the basic steps i should take in this process.

Ex.

1 Contracts/documentation to make sure is in place

2 How to be prepared legally

3 Best ways to make sure investment is protected

4 Making sure no one can run away with the money.

5 How ownership of property should be held

6 Dos donts etc

I have heard that securing your money with your name on the deed of trust isnt always good bc of certain risks.

Any advice much appreciated.

Thanks