About pos outlook,
I think I may miss his energy and Uber-responsiveness, but he just wasn’t learning that it wasn’t a personal forum.
rookieNYC,
I’m looking forward to those books. Beating my head against the wall here now with showing property that people don’t rent. This has, however, been a great ride. I happened to land in a town with an acute hotel shortage and had the only furnished rental units in town. Can you believe that I was once getting $2100/month for a furnished studio unit?
Now I am rethinking my whole business plan. It’s all about being able to shift gears quickly. This site woke me up–I still thank the forgotten poster who wrote, “If that is your market, you better milk that cow!” Which I did.
I am going to plan the next phase. If I ever get again out to NYC, rookieNYC, I would love to PM you and buy you dinner. To pick your brain about notes and stuff. That would be great.
This site has been enormously valuable to me. I am a Liberal in a far-right Conservative town. Sort of like being a Klan member in Coastal California. Because I am a business owner, I don’t talk politics anyplace except here. I have learned respect for other viewpoints through this channel. And I used to think that only Liberals were smart!
I get all you other regular posters–fdjake, goldriver, justin, christopher, etc. and value your knowledge.
As for you, Hoosier, maybe I should take you out behind the barn…
Furnishedowner
Furnishedowner,
Yes please PM me if you are ever coming to to NYC…Dinner would be great…I have also discussed the possibilities with Chris W if he ever made his way to NYC…I would love to share my tactics with others…There are so many ways to play the funding/bank game…You can do HML,you can purchase investment properties at a deep discount all cash and find a want to be landlord cashflow investor to buy(at a marked up price ofcourse)and hold the mortgage or provide 6 months to 1 year of HM loan to them at high rates until they go conventional…You can look into transactional funding which involves end buyers but doesnt carry the same safety net as collateralized lending does…You can purchase notes at a deep discount but I dont do this and I will tell you why…Alot of HML create the loans and keep the points and sell off the loan at a reduced rate…So when I got into the business I thought why cant I find the borrower,create the safest lowest LTV loan,implement all of my safety precautions…deed in lieu…prepaying myself the interest and points…using the best attorney I could find because the borrower is paying the fees,cherry pick the best deals and properties I want to lend on,work with knowledgable people who understand exit strategies and their market…There is alot more than just putting money on the street…But you will learn as you go…And I understand about expanding your horizons…I keep looking for numerous income streams even to this day…Real Estate,HML,Carrying Business notes,cash business,Holding long term mortgages at good rates,bankrolling certain business minded people…I have my hand in alot of different areas to create income streams…Income is the key to making money…Capital gains isnt bad either…And learning from others is key also…Since I got into HML I have picked up a new business from my attorneys…Now Im working on deals to sell tapes of properties that banks want off their books to other hedge funds…Once my attorney found out the line of work I was in he presented me with the offer…I havent closed the deal yet but Im working on it and if it closes the numbers are staggering…It will take time but more than anything Im learning new areas of the market…Like I said before I see more opps now in this economy than any other time in my career and Im only 39…
Furnished,
If you are interested in notes there is a guy here in Dallas named Tom Henderson that has a great website www.hpnotes.com with some good information and a great ebook. He also had a great newsletter although he has not sent one out in awhile.
Rookie,
Seriously man. Your my hero. The information you have given me is priceless.
I took the information you gave me and ran with it. I have a list of investors a mile long (many of whom I have met through this website) but as we all know you can never know too many good, smart, well heeled people. So what I did was find as many local HML’s as I could. I then went online and did a search through the local county clerks for each of the lenders on my list. Once I found the trust deeds with them as the lender I just followed the paper trail to the final investor. Many times it was just local people that buy notes and deeds on the side. Once I had their name (it is all right there for free on the internet) I just looked them up using whitepages.com or anywho.com and put their name on my list of (potential) investors. Other times it was local banks or credit unions that ended up with the paper. From there I would just call directly. I already know now that they are in the market to lend or buy paper; so now it is all about getting in front of them.
The mortgage crunch has been scary for people in my business. The recent refi boom has been great but as soon as the fed stops buying MBS; rates are going to shoot up by a point and refi’s will be dead. I now feel like I am ready to move to the next level and stop with the brokering and start acting as the bank. I learned in a couple of 30 minute phone calls with you what I could not find in many many hours looking online.
With all of the properties that are about to hit the market the need for capital will be greater than ever. I intend to be there to help meet that need. Thanks again.
p.s. To FDJake
Your call on the Ford stock has been flat out amazing. I think you have made a ton of money for a lot of people on this site (me included). Thank you as well.
Chris W,
You know my real cell # and you are free to use it anytime…I hope you do well in the HML business and I know you will…With your background in real estate and financing you are well suited to do extremely well…The beauty of HML is whats the worst case scenario?..The person defaults?..So what ?..At a %50-%65 LTV(keep in mind you are prepaying yourself interest and points so you lower your exposure and real out of pocket $$$) I will take that scenario and being that you have the loan done this way it insures that the borrower will almost always pay you back…I said it before and I will say it again…Lend to someone and have a good portion of their capital or equity and they will climb mountains to pay you back…Lend to someone with no skin in the game or make the LTV too high and you are in a precarious position because they will walk away and you will have limited room to really make a killing if you have to dump it…Another suggestion and this is the beauty of being you is that you probably have a long list of RE investors in your area…Contact the liquid investors and tell them you are now in the HML business and you wanted to know if they were interested in any properties that you get back through default(nevermind the added HML business they will bring you)…I bet they will be,naturally you tack on %20 and make the deal…Or sell it with owner financing(to a less liquid investor) at a pumped up price and hold paper at %9-%10…There are so many ways to play it…Thats why we are here to call on each other for ideas and techniques to build wealth…I truly love to make money,not because I drive a nice car or because I live in a nice house(because I dont,I live WELL below my means)…But more so to learn and create income streams…
christopher w,
So you sought out all those private party investors who carried notes so that you had a list to broker notes to?
And sometimes it was a bank or credit union that also bought or sold notes? (Yes, I was dissecting your post).
So you had your list to borrow HML (hard money loans) from? Or to broker the loan, you getting paid the points? Do I have a grasp of your business?
Wish you and/or rookieNYC would start a new thread on this. This is a whole new learning curve for me. And BOY, AM I INTERESTED!
I will check out the Tom Henderson info., too, thanks.
Furnishedowner
Furnished,
I want to be the HML. The reason I had the list of HML’s was so I could look for loans that they were the Lender on (also called the “Grantor”). Once they had closed the loan and recorded it I would follow the paper trail to the end investor. Like Rookie said; most of them sell the note after closing so they can lend it out again. 15-18% annually is nice, but think about if you can turn 100K at 5 points 10 times in a year. That is 5K per deal X 10=50K. That is a 50% return in a year. So before I close my loans I will have buyers or investors lined up to take the paper off my hands. Trust me it is so easy you will be shocked. People think the hard part is finding the investors but it is not. I think the hard part is getting them to trust you enough to buy your paper. Once you get one or two under your belt and your name is out on the street as someone who gets deals done you will have more business then you know what to do with. Like Rookie said; he now has people coming to him with opportunities because they know he can make things happen.
Rookie and I need to write an Ebook and start marketing it :bobble
I know what you mean about this whole new world. It is amazing how money is bought and sold these days. I just hope that I am not getting in too late in the game.
christopher w,
Say you have $50,000 sitting in a savings account at 3% annual interest. After 12 months, now you have $51,500.
You don’t like that, so you become a hard money lender. You lend out your $50,000 to a house flipper at 5 points (1 point=1% of the loan amount) upfront, plus 18% annual interest. (Isn’t 18% usary, by the way?)
The 5 points is subtracted from the amount lent out, so the flipper gets funded $47,500 cash. After 12 months, he has to pay you back 1.18% of what he borrowed, $56,050. And you still have the $2,500, which has grown to $2575.
Now after 12 months, the flipper has rehabbed and sold the house. He pays off your loan of $56,050. Plus the $2575 you now have $58,625 instead of $51,500. You just made $8,625 instead of $1,500 and you have the $50,000 to lend out again.
Is this correct? Am I missing something?
Furnishedowner
Furnishedowner
Furnished,
In Texas 18% is the max rate before it is considered Usury. Your numbers are almost correct. The way that Rookie does it and I feel comfortable saying that because he posted it himself earlier in this thread is to also collect your 12 months of interest up front PLUS your points. So the flipper gets $50,000 - $2,500 (points) - $9,000 (12 months interest up front) so NO MATTER WHAT you get paid. But your goal is not to hold that paper for 12 months. You want to sell the paper get your money back and repeat. Keep in mind your not going to make much on the paper because you have to make the deal sweet for your investor but if you do one deal a month you are making $2,500 X 12 = $30,000. At the end of the first year you now have $80,000. You will double your original 50k in less than 18 months on just the points alone.
christopher w,
You charge upfront interest on the whole $50,000 even though you have subtracted the points?
I’m trying to follow the thread of this…then you sell the note secured by the property, right? The note is for 50k, you have your upfront points and interest already.
How much of a discount would that note buyer want? $5,000? More? So you would get your cash back to repeat with the next transaction. Rather than wait out the 12 months. Do you transfer the trust deed or mortgage securing the note?
There must be state/federal laws governing private note sales, or is it determined by the marketplace?
Thanks for settling my curiosity on this fascinating subject.
Furnishedowner
Furnished,
Yes, you charge interest on the whole amount. Whether you subtract the points or whether they bring them to closing is a wash. They still have to pay them. By you subtracting them from the loan amount just saves them the time of having to wire the funds or get a cashiers check to bring to closing. The discount on the note depends on the buyer.
There is a new guy posting here named RobInAtlanta that has posted some great information on notes and yield. He actually called me and walked me throught he process of calculating yield using a financial calculator. It was great.
Thanks, I’m going to keep studying this subject. A nice plan to make money with money, rather than with real estate.
Furnishedowner