All Forum Posts by: Vontrick Davidson

@Vontrick Davidson wrote, “I thought maybe an individual loan shark would but why try it that way i keep telling him to do a HELOC. He doesnt want to do it”

I’m not sure what an “individual loan shark” is, Vontrick. Perhaps your investor should post here himself to get a less biased view. Your friend shows good sense and should maybe find a different advisor to help him find money.

Knowledgeable private/hard money lenders understand that owner occupancy has virtually nothing to do with making a business-purpose loan. They know that with very little exception, it’s the primary use of the money that’s important, not who lives in the home. In your investor’s case, you wrote that the use is to flip houses, which is clearly a business purpose. Thus, though lots of P/HMLs have blanket policies against owner occupancy, most could make this loan to your investor. There are a few problems, however.

Using a HELOC puts his and his family's house at risk. This is just a bad idea and an inappropriate use of his equity, in my view. By using the word “jumpstart,” you suggest he has no flipping experience. Why then would you encourage a HELOC?

Finding a private/hard money lender willing to make a $50k loan will be challenging. There is just not enough profit in it. $50k loans are the realm of friends or family. Realistically though, $50k is not going to go very far toward flipping homes – even low-dollar homes. Especially for the associated risk.

I don’t know his location, but buying right and borrowing as much of the purchase price and rehab from a Private/HML would be easier and defer much of the risk to the lender, not to his family's home. Finding a private/hard money lender willing to loan to a newbie will be also challenging but they are out there.

The problem as mentioned above is that anything owner-occupied is going to come with a huge amount of regulations and legal compliance - its why most private lenders will not do loans like this even though they would do it in the same exact situation if the unit was a rental

Yeah but all hard money lenders say the same thing. Its is primary residence and he's trying to do it as an investment property which cant happen

Interesting idea, but I doubt that will happen, depending on what condo complex it is and he probably wouldn't like the interest rate.  I'm guessing that would be something like 14% if anyone would touch it.

Probably needs to look at other options like hard money on the new project, borrow from 401k or stock account or life insurance. Maybe personal loan from a bank or credit union, friends and family.