Could this be a bad HMlender or ?

Good day everyone. I am new to investing and I recently wrote about a deal that a HML is going to help me with. How would you view this deal. I found what I think is a profitable property that is selling for 60k. I offered 50k and it was accepted. Ok, then I contacted a HML, he said that he can do the deal, he wants me to give him 5k of which 1k goes to seller for earnest money to hold the property. The promissory note that he sent me stated that the loan is for 60k with 14% interest compounded monthly for 1 year. The 4k will be given back to me at closing for operating capital, so he states, with a 1 week closing. Does this sound true to form because I thought the amount should be for the purchase price of the property. Maybe I’m wrong being new and all. I just wanted to know if I should proceed. I have been sent the contract for the property but haven’t returned it yet. What do you think?

HML are very flexible in how they work and with terms, So will let you go 6months before the 1st payment is due.
The interest is fine as they generally from from 12-25%, depending on deals.
The one thing that is weird is, they generally only lend 60-70% of the FMV. Is this home worth much more than 60K, since they are lending you 50K…

thank you rush, so you think the deal seems to be above board, as for the property, it is a mobile home park, and yes it is because when he finished his evaluations he was eager to help. The only thing that puzzled me was that he wanted the 4k then he was going to give it back, and I thought the note was supposed to be in the amount of purchase price.

Its not uncommon for some HML to ask for due diligence fees these days, so maybe thats what he wants. Many still do not care if you have the money to put in the deal so the 5K down and 4K to you at close and 1K for earnest deposit is alittle odd to me, but then again I have never done a deal with a HML, just looked into them in the past.

I still would not walk away from the guy, plus his interest rate is rather good. But i would recommend calling a couple other HML. If you have a broker you deal with alot, he may know some HML to refer you to, or ask around at your local REIA meetings.

Thanks again rush, I am more assured now because at least the morals are ethical. so I guess I will use him. I am supposed to call a few more HML’s just to get a feel for terms and maybe a better deal.
Thanks again.

good luck on the deal. mobile homes are great…many refer to them as little metal boxes that spit out lots of cash… :slight_smile:

keep us posted on the deal…