All Forum Posts by: Patrick Roberts

Quote from @Matt Devincenzo:

You said you purchased, but do you know how you purchased? It sounds like you may have purchased via a CFD/Land Contract meaning you were not deeded the property, which is a perfectly legitimate way to buy property in many areas. But that may be why the lender is now trying to execute a PSA...I don't know if that is the right way to accomplish the 'refi' or not, but that would explain part of what may be happening here.

CFD was my first thought, as well. The lender should be treating it as an installment sale if this is the case and not requesting a new PSA.

If you havent already done so, look into the RE wholesaling laws and property tax structures in SC. Let me know if you would like a realtor reference for the Columbia area.  

Something is very wrong here. Either your lender is an idiot or you dont actually own this property. Not enough info to determine anything outside of this observation.

Find a local experienced lender to partner with. Doesnt have to be some formal JV deal where you combine funds, but someone who will share risk with you in individual deals and help you with underwriting, credit analysis, and processing.

Lending is a skillset, and there's a lot that goes into underwriting a deal and preserving your capital. 

You wont need to do a ton of marketing with the amount of capital youre starting with. Your capital will be deployed with 1-3 loans, so unless you plan to have another outlet (like brokering to other lenders), that part can wait until later. 

You'll want to dig deeply into how you set up your banking. A lot of financial institutions do not allow lenders as customers and will close/freeze your accounts if youre lending out of accounts under the guise of a different business line. You should be able to order and send wires in under 24 hours with whatever institution you choose. 

There's way too much to cover to type it all out here. Youre best bet is to partner with someone local to you who is experienced and can guide you along the path with this. You'll definitely want to find a good attorney partner who can review title work and commitments/policies at the very minimum. Geraci will be able to draft your loan docs, but I dont know if they will review title - I've never tried that part with them. Jeff Watson is an attorney in Ohio who specializes in private lending, and some of his content would be a good resource for you. Hard Money Bankers has a great podcast for private lenders as well. 

Quote from @Bradley Benson:

@Patrick Roberts thanks for your reply. We have equity in our primary home but have not taken out a HELOC, so this would be a new line for addressing the balance. What are the chances a lender would call or cancel the line?

I don't see where we would loose the line. However, I do not see our family staying in our current home long term. When I talked to my realtor he had some hesitation on using the HELOC and it tying us to our current home.

It wouldnt tie you to your home - you can sell the home at any time and the heloc lien will be paid off out of the sale proceeds at closing, just like with any other mortgage. 

As far as the line being called, almost every heloc loan agreement will have terms reserving the bank's rights to call or convert the line if there are changes in your personal financial situation, as well as other circumstances. This hasnt happened en masse for a while, but it's still a potential exposure. Where this comes into play is if you use all of your cash on the purchase and then rely on the heloc for emergency liquidity, you may lose the line right when you need it most and have neither. 

Most helocs cost around $1k-2k to obtain and still take 30+ days to close. Given this situation, it may be easier to just use the cash for closing and then use delayed financing on the new property to get a mortgage on it and pull your cash back out. Closing costs would be higher, but the rate would likely be lower, so depending on how long you plan keep the financing, this may balance. I dont know all of the specifics of your situation, so definitely sit down with a lender about this option prior to planning on it being available.  

Do you already have a heloc, or are you going to apply for a new line for this reason? 

If you have the heloc already established and feel comfortable that the lender will not call or cancel the line, then I would use the cash and keep the heloc undrawn. This prevents you from paying interest on the drawn amount while the cash sits idle. If you feel that you may lose the line (and access to the liquidity), then draw on the line for the payment and keep the cash liquid.

If youre going to get a new line just for this reason, it might be easier to just get a mortgage on the property for the needed amount. 

Quote from @Peter Walther:

Quote from @Patrick Roberts:

Get a lender's title policy. Whether a buyer gets an owner's policy is up to them. The lender's policy will protect your interests as the lender in the collateral. The borrower's owner's policy will do nothing for you.

If the OP checks his Owner's Title Policy he may find the Conditions section of the policy provides:

CONTINUATION OF COVERAGE

a. Your coverage under this policy continues as of the Date of Policy, so long as You:

i. own Your Title;

ii. own an obligation secured by a purchase money Mortgage given by a purchaser from You; or

iii. have liability for warranties of title given by You in any transfer or conveyance of Your Title.

Therefore, it's my opinion that coverage under a lender's policy would be redundant at best.

 This is interesting - I was not aware of this. 

Quote from @Blair Ross Jr:

Quote from @Patrick Roberts:

Yes. There are a few technicalities, but this is common. 

Do you know what those tech's may be?

 A few of the major items for Conventional loans:

- must stay in the home at least part of the year

- cannot use rental income from the property to qualify

- some property-type restrictions

- most lenders require the distance between this and your primary to be "reasonable"

There are some Nonqm loan options as well. 

I recommend getting a backup plan in place in case you cant get financing. This is going to be tough.

Every scalable, pay to pay lead gen source is likely to have conversion rates under 10% (1-4% is the norm that I have seen). You have to really niche down as well as have a serious moat for paid lead gen to work well. Everybody is throwing money at buying leads right now.