All Forum Posts by: Derek Dombeck

We want to know your rehab plan for the property and your exit strategy. Put together your financials, scope of work with contractors bids, pictures, and cash flow analysis if it's a rental bridge loan. Also, supply us with a CMA that has legitimate comps.

I'd be happy to talk with you about how to safely choose a lender to invest through. Contact me directly

This is easy...... the borrower will carry an insurance policy on the property and list you or your LLC as a Mortgagee. This is important that you are not listed as an additional insured, because the lender gets paid before additional insured people.  The borrower should also pay for Lenders title insurance to protect you as well.

This part of your thinking bothers me.......
"Since I’m not guaranteeing anything personally, I could just let them
foreclose and I’ve just lost some time, or I can refinance and move on
with my life."

If you promise to make someone's mortgage payments, you should do just that. If the loan gets called due on sale, you should have the ability to pay off that debt. If you can't do that, don't buy property subject to the mortgage.

@Alec Hilliard

We only lend in WI

I'd cut your losses and go somewhere else. We would never string along a client like that. Some fees are normal, but this is ridiculous in my opinion.

Your LTV should be low enough to protect you in the event of a default. We typically only lend up to 65% of ARV because we know we can take that property back and not lose money after all expenses of the foreclosure. I would also suggest shadowing  a  lender or hire a mentor to cut your learning curve.

I would offer them a percentage of future equity when you sell only. Not a monthly cashflow split, as this is paperwork intensive. We do these similar transactions for a different purpose, and here's a couple of ways to structure it.
1. You could give the cosigner a participation note/mortgage which would have language in it that says there are zero payments, zero interest, but there payoff is X% of the equity when the property sells or refinances.
2. The other way is by using an Option Contract which would have similar language as a note, in that the cosigner would have the Option to purchase X% of ownership in the property for $10 for the duration of your ownership. You would want to have the right to buy the option back at any point if you refinance and they are no longer cosigners, in my opinion. So, in this example, when the property sells in the future, if there's 100K in equity, at the closing table you would have your cosigner listed on the closing statement as an expense/payoff for their percentage the same way a lender would be shown. They get paid out of the closing proceeds and everyone is happy.

Joel,

I think I can help with private resources and I'm familiar with your area. Reach out to me directly.

The reason most hard money lenders won't fund any property that you are living in has to do with foreclosure laws in your state. Where we lend, I can foreclose in 3 to 4 months on a non owner occupied commercial loan. If the borrower lives in the property, its considered a consumer loan and it could take over a year to get a foreclosure done. Most of us are not willing to risk it.