All Forum Posts by: Account Closed

A loan greater than the property value can be risky, if nothing goes wrong everything is fine.

If the money is going through a title company (a good idea) the money will be distributed to the owner of the security property, likely the LLC in this case.

The borrower/property owner should be LLC to avoid being a consumer loan.

I've found that not only is it less cumbersome to have one account using QB classes, but when you would have a negative balance in one of the two accounts because of temporary cashflow causing you to move money from one account to the other, you don't have to move money when using one account.  Assuming both properties are under one tax ID, as was mentioned.

... if Prop 10 Passes.

I just received a No on Prop 10 flyer in the mail saying it has been certified for the Nov 6 ballot.  It suggests up to 20% reduction in equity on rental units if Prop 10 passes.  I'm not, but if I were in the market for a multifamily I would be tempted to wait until after the vote.

Sounds very fair.  What does 'at least 6 months before you could refi' mean?  Do you get a big prepayment penalty if refi in less than 6 months?

If there's an appraisal it might very well come back lower than 125k and kill the deal.  If there is something fishy between lender/borrower/agent it's not your problem.  Hard money lenders don't usually do consumer loans because of the huge compliance required, that's kind of strange.  If it's really worth 125k I would ask why you are selling it so low.  If it's not worth 125k I would say lender won't be in business much longer.  I don't think I've ever seen a sales commission of 25%.

I saw this same scenario played out recently.  This property was worth $3mil.  Agent said no problem we have an appraiser the will appraise at $5mil.  Seller went to attorney asking if he was doing anything wrong, attorney said no.  Agent/Lender/Appraiser/buyer maybe, but not seller.

So they sealed the deal and went to closing, who knows what happened after that exactly but the closing date kept moving out month after month, the deal never closed. I think the agent went all over town trying to find a stupid lender but couldn't find one. The only thing I heard is the lender they had lined up saw in the MLS before they could delist that it was listed at at $3mil and said no.

The lender could be using other peoples money, split that 25% commission with the agent, investors are hung out to dry, lender-broker say oh well that happens sometimes.

I think it's worth noting that flipping is not investing, it's a job, and a not particularly easy one.

@Jay Hinrichs

"I can buy a property in 2 hours all by myself.. of course not title insurance but I as stated get a date down on the phone and they are 95% accurate.."

Isn't the cost of title insurance worth the savings on that 5% inaccuracy?

As a lender I've seen dozens of deals here in SoCal, flippers are lucky to make 10%.  Not sure where you come up with 89k purchase price.  For a 6 mo flip I would think a 100k-120k purchase price would give you 10-20% profit.  How are you determining purchase price?

Good question.

Assuming it's vacant while rehabbing, and repairs are relatively minor, you need a Vacant policy, not a Homeowners policy or Landlord policy.  If repairs are more extensive, like adding sqft, you need a builders risk policy.

AND, the named insured needs to be your entity, not you personally.  With your lender if any named as Mortgagee.

If there are any insurance experts reading this please correct me if I'm wrong.

My experience as a lender has been flippers will get a homeowners or landlord policy because it's the cheapest, or have the named insured in their personal name, again because it's cheaper.  Flippers like to do insurance on the cheap because with a near 100% loan what do they have to lose...lender loses.

Believe it or not, I had one flipper whose insurance agent didn't have a clue what a Vacant policy was and kept insisting a homeowners policy was 'the appropriate coverage' to use his words.  I eventually put forced placed insurance on the place (very expensive) and flipper paid.

 There would be two instruments, a note and a deed of trust or Mortgage.  The note would specify the terms of the loan ... interest rate, term, prepayment penalty if any, late fee, etc.  Arizona I believe is a deed of trust state so the lien instrument would be a deed of trust, not a  mortgage.  If there is just a note it would be an unsecured loan, still a loan but not secured.  The problem with an unsecured loan for 30k is that if you decided not to pay he would have to go through the court system to get a judgment costing him way more than $30k and still he would only have a judgment, so, in my view an unsecured loan depends soley on trust.