I have someone that approached me about providing a HM loan against their mortgage free residence…The residence in a very affluent area of Queens NY that I’m very familiar with the price of homes…The said borrowers home is free and clear (no mortgage)…Home is worth 650-800k in todays markets but will decrease over the next 2 years no doubt…My attorney has researched this and now he feels that we will have the seller sign the deed and my attorney will hold it in escrow…Instead of having the seller sign the property over to me entirely…The deal is %50 of appraised value at %14 +4 points for 2 years…My concerns are am I structuring this loan correctly (safety wise,contractually wise) because I expect the loan to be defaulted on (after 1 year because he is paying 1 years worth of notes at closing + 4 points) and having to take possession of the house and sell it on the open market…The loan should be in the area of 400k+…I would appreciate any all advice on protecting myself outside of the usual…
Ok no advice to give I guess…
What I did find out was to hold the deed in lieu…Borrower is essentially signing the property over to me but I’m not actually taking title but holding that opiton and deed in escrow just in case the borrower defaults…
Anyone else familiar with this?
Loan to own eh? Are you going to be on the insurance policy after they burn it down?
I’m glad someone else said something before I did. Normally Rookie I respect everything you say especially after you and I had that conversation on the phone. But what you are doing here is predatory lending. You are loaning them money hoping they can’t pay you back. Your better than this.
But what you are doing here is predatory lending. You are loaning them money hoping they can’t pay you back. Your better than this.
Ouch that hurts…And yes I do practice predatory practices in the default business,just not real estate …I’m not ashamed of what I do,people put themselves in these situations Chris…Let’s be for real,if you had the option to tilt things so far in your favor you wouldn’t take the trade?..Sorry I will be honest and say I would and I do…I want a win win situation,I dont want to have to chase some foreclosure for 24 months and pay attorneys along the way…The way I want it structured is safest for me…If he doesn’t pay the loan back he deserves to lose his house,this is my money not some loan from a bank…Fwiw I did put in the contracts as long as he paying the monthly interest he has up to 24 months vs 12 to get even and buy me out of the loan…I also increased my risk alot by being a nice guy…What happens if the market crashes and the house falls below $400k ?..I have also spoken to HM lenders to gain some insight into this very lucrative business…There is an arbitrage in this industry when its done right…Call it what you want and I totally respect your morals…
I’m insured on the house for fire etc…The deal hasnt been signed yet…
I’d also like to add that the nature of this person’s income is in serious question…He lives well above his means and God knows what he may do for a living to maintain such a lifestyle…Is it really my fault that he lives this way?..This isnt some old blind lady ro some mother of 5…This is a single guy that has inherited a ton of money and lives like a pimp…
So is your goal to eventually become a fairly sizable HM lender? With the way the economy has been going I was just thinking it would be a great time to open a bank. If you actually have the capital it’d be really easy business because you should know what exactly NOT to do. Another plus would be you’d be one of few places with cash so you could charge profitable rates to very qualified applicants.
If only I had the monies :banghead
So is your goal to eventually become a fairly sizable HM lender?
If I could find a few deals like the one I discussing here thats all I would be interested in…Opening a bank is not my goal…Being a fairly sizeable HM lender is not my goal either…I want a couple of select deals ,properly collateralized and thats all…
TY…And yes its %100 legal in NY state…
I live in Queens, and the values have definitely keep up despite changes in the market. Sounds like you may have a good deal here…Best of luck.
blueprints,
My family is from Malba and the area hasnt been too hard at all…But yes this hard money deal is a good one…I had the property appraised and it came in at $735k…I’m comfortable doing the loan…