Does anybody have expereince leveraging their own funds (say of $100,000) for larger funds (say $1,000,000) with the purpose of lending the larger funds as hard money?
I do some hard money lending on commercial properties around Portland OR. The advantages/disadvantages of leveraging your loans are basicly the same as buying real esate. Your equity dividend grows with your risk.
I use more leverage on loans where I have an assignment of rents clause to give me access to the rents (hopefully the building is rented)
Main thing is know your market and make certain if a leveraged loan goes into default you have enough cash flow to cover your debt service for the two years (for commercial properties) it may take to foreclose and resale your REO.
Alubeck- I borrow funds to lend in some amount on about 75% of my loans. I can pledge the loans under my LTV requirements to raise more money but my loans are 5 years or less so I have a lot of payoffs that I need to put back to work.
James- REI market is still strong. I don't lend on 4plex or smaller to avoid being put into REPSA's grasp. Banks are still throwing alot of money to REI investors so I don't see too many. Anything I look at has been turned down by many banks before they come to me. I look at loans alot differently then they do.
The SEC and the local state regulators take a strong interest when you get into the lending business
interest.
There are criminal and civil penalties if one does not follow the rules of the game.
So, be very careful when lending. It is very easy to cross the line between securities and RE. Two aspects that trigger the issue are defraying the risk by pooling and having passive investors in the pool.
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I do some hard money lending on commercial properties around Portland OR. The advantages/disadvantages of leveraging your loans are basicly the same as buying real esate. Your equity dividend grows with your risk.
I use more leverage on loans where I have an assignment of rents clause to give me access to the rents (hopefully the building is rented)
Main thing is know your market and make certain if a leveraged loan goes into default you have enough cash flow to cover your debt service for the two years (for commercial properties) it may take to foreclose and resale your REO.
Did you borrow money to fund these deals? Or did you use hard cash?
Note_Buyer,
-James
Just curious, how is REI market in OR for duplex, SFH, and small apartment investment?
Your advise is greately appreciated.
Alubeck- I borrow funds to lend in some amount on about 75% of my loans. I can pledge the loans under my LTV requirements to raise more money but my loans are 5 years or less so I have a lot of payoffs that I need to put back to work.
James- REI market is still strong. I don't lend on 4plex or smaller to avoid being put into REPSA's grasp. Banks are still throwing alot of money to REI investors so I don't see too many. Anything I look at has been turned down by many banks before they come to me. I look at loans alot differently then they do.
The SEC and the local state regulators take a strong interest when you get into the lending business
interest.
There are criminal and civil penalties if one does not follow the rules of the game.
So, be very careful when lending. It is very easy to cross the line between securities and RE. Two aspects that trigger the issue are defraying the risk by pooling and having passive investors in the pool.
Read:
http://www.thecreativeinvestor.com/ViewTopic30713-22.html
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=551
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=437
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=420
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=283
You also should read:
http://www.mbaa.org/state_update/2003/nc/hb_917_vetoed.pdf
http://www.mbaa.org/industry/reports/04/s_p_0212.htm
http://www.mbaa.org/industry/docs/03/S1928_1124.pdf
http://www.mbaa.org/resources/predlend/