All Forum Posts by: Jeff Rabinowitz

I concur with Jon. Many of my pet owners renew leases but many of my non-pet owners do also so it is difficult to judge if one group stays longer. The additional rent almost always is more than the damages; however, when there is damage the expense can be significant. The worst one I had was a 2 cat family. They stayed for a couple years--the urine smell was intense when they vacated. We used enzymatic cleaners (had to coat most of the basement because we couldn't locate the source--it was everywhere) and got it under control but lost more than a month's rent dealing with the odor.

@Account Closed , I have been approached about such a scenario and it was very difficult to come to terms. The investor who approached me had other property which they owned free and clear. What we decided on was a limit to which I would provide funds against the existing property. The potential borrower was not successful at the auction.

It is actually a fair amount of work. I had to evaluate a situation which was far from certain to occur and, as I suspected, didn't. It was an interesting problem and I enjoy working out new situations but I would be unlikely to do it again. One exception would be if the borrower were an investor I knew well and, preferably, I had already done several deals with. Another would be if the property was in an area where I was interested in acquiring more rental property and the property was inspected beforehand so I was sure the target price represented a great deal.

I would be surprised if there were not usury laws in all states that place a legal limit on the interest that can be charged on loans. The limits on residential loans are lower in Michigan (and probably other states) but there is still a limit to the interest rate that can be charged on a business loan. That prevents loan sharks from trying to collect their debts through the courts--they use other methods.

Originally posted by @Albert Bui:
@Jeff Rabinowitz - that makes good sense for option B since we can only get out 49,200 it wouldnt be enough to pay back the private investors if they had a recorded lien against the property but if the private investor agreed to modify their note with a higher rate behind the banks 49200 first lien it may still make sense depending on closing costs that might otherwise offset the savings of even doing so. In Option A the 120k would payoff the private investor completely so that wouldnt be an issue.

It would probably not be very easy to get a private investor to switch from first to second position. There is a limit to the interest that can be charged on a note in order to compensate the investor for the added risk.

@Albert Bui , I assume the private lender has a lien recorded against the property (if they don't they are foolish). Cash out refi's are much harder to come by now. I would be surprised if any will do one from second position and not require the initial lender to be paid off.

@Jason Eyerly , in your #1 above you have not reduced the debt on the property. You have borrowed the $49K and paid it to the original lender. The total debt on the property has actually increased by the amount of the closing costs on the second loan. Granted the interest rate might be a little better but it would mean the bank would be in second position. Would they do that?

Occupancy is a very big factor. None of the private lenders I know (myself included) will touch an owner/occupant loan now no matter what the stated purpose is. I only know a couple hard money guys. Both ceased all owner/occupant lending also.

Neither would I purchase a note on an owner occupied property. The rules may allow this if the loan was originated before 2014 but it is not worth the risk. The potential penalties are severe and the CFPB instructs borrowers on how to sue a lender.

@Don Konipol , it is wise to have that statement signed but I'm not positive that will cover you. I have purchased notes that were originated as investment property loans and the borrower moved into them anyway. I had to initiate foreclosure on one and since the borrower filed a homestead exemption (probably illegally) my lawyer would only proceed as if this were a residential note. In Michigan that means a lot more time between filings, etc. It is way too early to know how the CFBP will act if a similar situation occurs. Anyone want to volunteer to be a test case?

Meet some local private lenders and learn what types of projects they are looking for. You will have the best chance of finding funding if your project matches what the local lenders want to invest in. Lenders with real estate experience often attend REIA meetings. Perhaps, you should also.

Private lenders are easy to find especially in this low interest rate environment. Since you are starting out you may benefit from the advice that a local lender with real estate experience can provide. These people often attend REIA meetings. Perhaps, you should also.

I've got 4 of his courses. I recall listening to them and finding some value. They take up scarce storage space. I would consider parting with them. Look me up if you'd like to discuss.