13% Interest Rate From...
Okay, so I found a guy willing to deal and I just got off the phone with him. Says he's got a hard money lender or two willing to work. When asked about the interest rate I would be dealing with, he hit me with 13% right out the gate. 13%?! Holy shnikes...is this about right or is this guy looking to crank someone. Advice is greatly appreciated and always welcome as these boards have and continue to be a huge resource for me as a beginning investor.
13% interest rate for a hard money lender is right in line with what I am used to seeing... There are probably points involved, too... The lender I use charges 15% interest, charges 2-4 points, but I use them and they are used a lot in NJ... BUt for a good investment deal - it's worth it!
Good Luck!
[addsig]
Yup, I am a mortgage broker (among other hats I wear!) and do HML all day long at 11% with 4 points....but all I need is a 1003 (credit app) and appraisal. They don't verify anything. And the max LTV is 75%.
[addsig]
Please forgive, but this is new thinking for me:
Hey Matt,
Can you elaborate on what deals make this loan work?
Shirley,
Are there closing costs? Monthly payments?
Share some specifics on how this creates the win/win that it must.
~Thanks!~
Geez-weez. For a first time investment with hold and rent out mentality is this a decent way to go?
JMAAB -
I would not personally use hard money on a long term basis. It boils down to the following: Why are you using a hard money lender? Is it because you can't qualify for anything else? Or because the property needs repair, and a "normal" bank lender might balk? If your credit is in the OK range, why not do the following:
1) Use the hard money so you can buy and renovate a place. That gives you cash money - and dealing in cash can mean big leverage sometimes...
2) Once you've renovated, if you're going to rent, then convert to a longer term lower interest rate loan.
It sounds like you're trying to match a long term problem with a short term solution. Kind of like buying an Indy car (very expensive, burns out quickly) to drive around town for the next ten years... Both and Indy car and an SUV have their place - they just need to be used appropriately.
-Jeff
Quote:
On 2004-12-29 16:29, jblackwell wrote:
JMAAB -
I would not personally use hard money on a long term basis. It boils down to the following: Why are you using a hard money lender? Is it because you can't qualify for anything else? Or because the property needs repair, and a "normal" bank lender might balk? If your credit is in the OK range, why not do the following:
1) Use the hard money so you can buy and renovate a place. That gives you cash money - and dealing in cash can mean big leverage sometimes...
2) Once you've renovated, if you're going to rent, then convert to a longer term lower interest rate loan.
It sounds like you're trying to match a long term problem with a short term solution. Kind of like buying an Indy car (very expensive, burns out quickly) to drive around town for the next ten years... Both and Indy car and an SUV have their place - they just need to be used appropriately.
-Jeff
You hit it. I am having trouble getting a conventional bank loan. Credit Unions, Banks, all tell me to screw. Which is fine, I don't have a problem with that. I'm just trying to squeeze in where I can with what I have.
The exact words from the guy (HML) were, "I take the loan in MY name, then after you pay for a while, we transfer it to YOUR name and you're all set." I'm not sure whether or not this is the best way to go, just that it's A way to go, which one way more than I had before I spoke with the guy. Gotta start somewhere, right? Suggestions welcome, as usual.
HML's are used for short term loans, generally, and have a one year balloon. They are THE single most expensive way to borrow money that I know of.
Quote:
On 2004-12-29 16:03, ceinvests wrote:
Please forgive, but this is new thinking for me:
Hey Matt,
Can you elaborate on what deals make this loan work?
Shirley,
Are there closing costs? Monthly payments?
Share some specifics on how this creates the win/win that it must.
~Thanks!~
For short term hard money loans that are used for rehabs... You can borrow the money for the purchase and rehab and then get it sold as soon as possible...
Does this make sense? There are closing costs, and you need a down payment as well as part of the rehab money, but it's not nearly as much as trying to pay for everything yourself... If you have the loan for 3-6 months, it's a good deal...
Understand?
[addsig]
JMAAB -
<JMAAB wrote>
You hit it. I am having trouble getting a conventional bank loan. Credit Unions, Banks, all tell me to screw. Which is fine, I don't have a problem with that. I'm just trying to squeeze in where I can with what I have.
</JMAAB>
Let's start at the beginning... What are your goals? Buy, hold and rent? Buy, fix up, and rent? Buy, fix up and sell??
Given what you've said above... it looks like you'd like to become a landlord. I can give you some other resources to help you see if you _really_ want to go there. PM me, and I'll share them. Can't here because they'd get deleted. No disrespect to Joel and the gang. This is an awesome site, and they have the right to officiate as they please...
Now, assuming all of the above... A) Not a lot of money to put down B) You're in upstate NY C) Bad credit I assume that you have a solid job??? If not, I'd suggest you fix that, and work on wholesaling properties rather than be a landlord. Once you have a decent "nut" of money to invest - THEN consider going landlording. 3-5k at a minimum. Things happen when you rent homes. Places need fixing. You make mistakes and rent to the wrong people. They trash your place. Etc. ad nauseum. "Stuff" happens... So you need SOME money to go there.
The best place to start is to find a rental owner that is looking for a way out. Maybe they're getting older and don't want to deal with it any longer. Maybe their kids moved away and they want to move closer to them. Look into letting them finance the deal. They can sell it to you on a contract for deed at a much better rate than 13% , and likely will. Look around for a duplex - rent one half and live in the other... There are a million ways to do stuff like this. Just don't believe that it's as easy as the "guru's" suggest. It takes work and smarts - but in your area, I suspect you can find likely deals. Also - winter is one of the better times to buy... think about it - heating problems, people don't want to move, rental market is slow....
There's a few simple ideas.....
-Jeff
a good mortgage broker should be able to give you all the alternatives based on a prequal of you and the property.
13% may not be bad pending your situation...but many national lenders can give you 5 -6% conforming rates on 1-4 unit properties....or 8% non conforming rates on N/O/O investment property.
B/C rates and lenders charge in the 10 - 14% range pending your situation and property info. for Non Owner Occupied Investment property.
its limited but you have the same loans available to you as for 2nd home financing from regular lenders (Countrywide, Washington Mutual........)
these loans are posted at www.mtgbrokerscorp.com/investment_loans.htm
hope this helps
Quote:
On 2004-12-29 18:19, jblackwell wrote:
JMAAB -
<JMAAB wrote>
You hit it. I am having trouble getting a conventional bank loan. Credit Unions, Banks, all tell me to screw. Which is fine, I don't have a problem with that. I'm just trying to squeeze in where I can with what I have.
</JMAAB>
Let's start at the beginning... What are your goals? Buy, hold and rent? Buy, fix up, and rent? Buy, fix up and sell??
Given what you've said above... it looks like you'd like to become a landlord. I can give you some other resources to help you see if you _really_ want to go there. PM me, and I'll share them. Can't here because they'd get deleted. No disrespect to Joel and the gang. This is an awesome site, and they have the right to officiate as they please...
Now, assuming all of the above... A) Not a lot of money to put down B) You're in upstate NY C) Bad credit I assume that you have a solid job??? If not, I'd suggest you fix that, and work on wholesaling properties rather than be a landlord. Once you have a decent "nut" of money to invest - THEN consider going landlording. 3-5k at a minimum. Things happen when you rent homes. Places need fixing. You make mistakes and rent to the wrong people. They trash your place. Etc. ad nauseum. "Stuff" happens... So you need SOME money to go there.
The best place to start is to find a rental owner that is looking for a way out. Maybe they're getting older and don't want to deal with it any longer. Maybe their kids moved away and they want to move closer to them. Look into letting them finance the deal. They can sell it to you on a contract for deed at a much better rate than 13% , and likely will. Look around for a duplex - rent one half and live in the other... There are a million ways to do stuff like this. Just don't believe that it's as easy as the "guru's" suggest. It takes work and smarts - but in your area, I suspect you can find likely deals. Also - winter is one of the better times to buy... think about it - heating problems, people don't want to move, rental market is slow....
There's a few simple ideas.....
-Jeff
I've got the freebie account here. No PM with that gig. I appreciate your input, by the way. I've got $20k to utilize in an effort to move vertically financially-speaking instead of spiking briefly and then leveling off when the money runs out and ending up right back where I started. I would like to spread it out over 3-4 properties and provide myself with a secondary income. I am searching for the best way to achieve this goal...as far as actual numbers go, I am attempting to squeeze at least $750 a month out of my investments and obviously more than that would be great.
-Joe (JMAAB)
Joe -
OK then, I'll get creative... use jblackw at yahoo .dot com ,,,,
Now - if you have 20k at hand, youcertainly can do it. I've only driven through your area once, a few years ago, but what you are after should be doable. If you have 20k on board, why are the banks not willing to deal with you? Do you have a really nasty credit score or something? Even with a BK, I would think that you should be able to do something.... but I digress....
Assuming that I was readyto become a landlord, I would start by trying to dig up rental properties that would cash flow. As a loose rule - the more units per property, the better the cash flow. Single Family homes don't usuaslly cash flow as well as duplexes, triplexes, etc. That said, you want to start out reasonably. Hence my thought of a duplex.... Start scouring for them and ask LOTS of questions. Work the details a hundred times on paper before you commit money to it. And for heaven's sake, don't fall in love with any given property, no matter how sweet the deal. Shoot me an email, and I'll try to get you some other resources to round out a landlording education before you jump in headlong...
-Jeff