2nd mortgages investments

Has anyone been involved with 2nd mortgage investments? Here is what is being proposed? What is your opinion?

Owner is looking for $100,000 loan. Doesn’t want to do a 2nd on his home and prefers to have an investor.
Owner had a lien against his rest. for the $100,000.
His home is worth about a million and four. His 1st mortgage is $450,000. (Have to love SoCal housing!!)

His is willing to pay the investor, $9,000/month for a year, plus 1 point.

What do you think?

His accountant is in my family and the accountant doesn’t have the liquid cash on hand. (I had to ask my uncle why he wasn’t interested!)

Not sure…any advise would be appreciated!

I think it’s 9% (8% interest + 1 point)…

If he doesn’t want a 2nd against his house, what is he going to secure with?


Correct me if I am wrong, but I think what was meant was that he would rather use private investor rather than get a 2nd via a traditional lender.

these are called 2nd trust deeds.

to see if this is a good deal, you need to find out the current appraised value.
if its over 800k do it, otherwise pass.
also 8% is a little low. i’ve lent out money at 12% or more.
also charge 2 points atleast.

Thanks for all the feedback…we are still getting our feet wet with rei, so we really do appreciate it. And yes, he prefers to go through a private lender.

Great heads up on the %; I wouldn’t have know. We will most certainly counter with a higher %. :smiley:

if you’re interested in lending out money, send me an email with the amount of money and what terms you’re looking for and i’ll keep you
in mind when an opportunity arises.

ditto on what niravmd said

I’ll keep that in mind. :slight_smile: As I stated in my previous post, we (husband and I) are new at this. We have an offer out (our 1st!! ;D) and this 2nd Asset Loan flew into our laps.

We find it curious why someone with sooooo much equity would not just go the conventional route. What are your thoughts?

If you are suspicious there is good reason! Ask why there might be more there then meets the eye! I would ask what the deal is there and find out more. Have you talked to this guy direct or is this a FOAF (Friend of a friend) I would talk to him direct before lending a dime!

a smell a rat.

first, you mention this guy already has a $100k lien against his house. Thus if you were to do a secured note against his property, you would be in 3rd (!!!) position (assuming this are no tax liens :P)

second, from what I know (i’m in SoCal), a privately done 2nd is at least 12% interest (or higher).

I see this is as a bait-n-switch. He talks about having equity in his house, but what he wants is a straight investment loan so this is not an REI transaction!!! An unsecured loan at 8% interest—he is out of his mind. Having worked on a few investment loan type things in the past (with start-up companies), this is a very different arena than RE investing. As one person I worked with described it as the “wild, wild West of lending”

I would only consider deal as a secured note AND with a lot more info about this personal fianances. While he may have a lot of equity in his house, I bet there are a few financial monsters hiding in his accountants ledgers.

That is exactly what we were thinking!! Right now I guess we stick to obtaining rehabs!

Thanks! As my mother always says “if it walks like a duck, looks like a duck, it most likely is a duck.”

But getting reassurance from everyone here is nice, we would hate to pass up on a great opportunity.

Thanks again! :slight_smile:

In the Army, there is a term for guys like this…(borrowed from Korean-English)…“SLICKY-BOY”.

Proceed with extreme caution – it might be fine but you might find yourself on the ‘rong end of the stick’…

Where is he going to get the $9K a month of free, spendable cash for 12 months?


8% is no deal at all.
consider yourself lucky you didnt get sucked into this.