All Forum Posts by: Derek Dombeck

Security is always our highest concern. At what percentage is the loan to value? How and when will I get my money back?
We have a fund now for Bedt REI Funding and these are the questions that come up the most.

In our Hard Money Business, we never lend to owner occupants because if I have to foreclose, it would be a consumer loan instead of a commercial loan which can take much longer to get the property.  This differs by the state  you lend in. Also, you should absolutely get a lenders title insurance policy to protect your money. Don't let the fact that you like this guy blind your decision making.

The way you explained the deal, it sounds more like a joint venture than a hard money loan. That's ok, but the way you structure this deal depends on how you will get paid a return on your 40K and how your money will be secured. 
1. Will your IRA have ownership?
2. Will your IRA get an interest payment, part of the equity, part of the cashflow, or all of the above?

As a lender, we don't have time to chase our borrowers down to constantly get more documents.  You should have everything prepared to increase the likelihood of getting the loan.
1. Purchase Contract
2. Scope of Work
3.Cash Flow Analysis if it's a rental
4. Pictures
5. Comps
6. Your Personal Financial Statement
7. Entity Documents
8.Tax Returns
This list may vary by lender......

We built our lending company to fill the need that you have. We pay our pool of investors 6 to 9% on their money and we lend it out to flippers and landlords on short term notes. A good majority of our investors use their retirement accounts. When done correctly, this is a very safe investment because we only lend at 65% loan to value. This means every $1 lent is secured by $1.50 in value. We are in a 1st mortgage lein position and the borrower has to pay for lenders title insurance and hazard insurance to protect us. So, my suggestion would be to either learn how to be a private lender or partner with someone who is already doing it. But be cautious and ask alot of questions.
Feel free to reach out to me directly if you need more information.

Paying the lender is easiest with online payments. I usually share a password with the seller using my email address on the loan account. That way the seller can always go check to see the payment has been made. The insurance is totally different.
You can not keep the buyers insurance policy in place. Because, once you take title, the seller does not have an interest in the property and if you made a claim against the policy, they would not have to pay it. Instead, you take out a new policy through an insurance company that is familiar with subject to deals
( there aren't many). You list the sellers name on the policy 1st with the acronym A.T.I.M.A., which stands for as their interest may appear.  Then you list your name 2nd with A.T.I.M.A behind it as well. This is done to avoid tripping the due on sale clause, because the insurance company has to send a notice to the lender anytime there is a chage in coverage, by law. Personally, I take title in a trust when I buy subject to as an additional layer of anonymity from the lender.

Incorrect. Every seller financing transaction is different. I just closed a house last week that the seller financed at 0% interest with $350 monthly payments with Zero down payment. Why??? This structure gave him the least amount of taxes to pay.
My point is that you should structure every deal on purpose so that both parties benefit and don't ever assume what a seller wants........ just ask them.

You are allowed to do anything you want as long as both parties agree. Yes, you can and should discuss owner financing on any deal. All you need to do is get face to face with the seller and ask them what they need. Ask alot of questions and then solve their real estate problem. If you become a problem solver for people, the deal flow will increase. Most buyers are only concerned about themselves and therefore can't find deals. Deals are not found, they are made after talking to sellers properly.

I do a fair amount of creative deal structuring and negotiating Seller Financed deals and I can tell you that when I get a lead, most of the time the sellers did not know that they wanted to accept terms. You need to get people into a conversation to find out their needs and then you can propose a seller financed offer. You will most likely not have much luck soliciting them with a letter that says the words " Seller Financing". All of my leads are sent a short letter that says we can buy their home for cash and when they respond, I steer the conversation to terms if I feel like it will solve their needs.

@Shiloh Lundahl

I think it's about the mentality of what you are trying to accomplish. Years ago, when I had a job, I dreaded the alarm clock because it meant I had to go somewhere I didn't want to be. Now, I can't remember the last time I used an alarm clock. I naturally wake up after 5 to 6 hours of sleep and I'm ready to get something accomplished. Sometimes, it's 4 am and my mind is jacked up with an exciting deal going on and I jump out of bed like it is Christmas morning. As it's been said, If you are doing something you love, it is never work.