Post: #26

(02-15-2013 01:24 PM)renotime Wrote:  What is the least amount of money you can start this with?

When I first started I remembering doing some as low as 5-8k. Typically I won't do under 10k now. But my sweet spot is probably between 50-75k.

Post: #27

(02-15-2013 12:52 PM)EasyMoney Wrote:  

(02-14-2013 08:46 PM)sucio44 Wrote:  Easy Money,

do you think its a good deal for an investor to become a private lender on a hard money deal? Also, is it a good deal to buy notes from a hard money lender?

Great thread, BigInJapan.

Yes, absolutely. It's one of the safest investments out there, if done properly. But remember, anyone selling you a guaranteed investment is selling you a bill of goods. All investments have their associated risk, but I completely endorse it. The key thing you wanna look for in a hard money deal is LTV % and the reputation of the originator. See the moral hazard in the industry works like this: every originator makes money two ways: from the percentage of the note they keep (this is called servicing) and the fees they charge to get the loan done (also known as origination fees). Now, the fees is based on percentage of the amount being lent. Its typically in the 2-4% range. So if I lend you 100K at 3 points at say 9%, you're gonna eat 3K of that in points. and the originator is gonna sell that note at 8% and keep 1% of the annual interest for himself. A conservative LTV is how you cover your ass with this investment. Because if property values drop and you've lent more than the value of the property, you're fucked. Most hard money lenders don't report to credit bureaus, so there's no real problem for the borrower to walk away from the property in that situation. So if the originator wants to be greedy, they'll use high LTVs hence getting more money in points. Points are never shared with the owner of the note; they're kept by the originator. So the hazard is that they'll jack up the LTVs to make more on the front end in points, because ultimately the risk is undertaken by the note holder. This all works well and good until the market collapses, which it did, and when it did here in Cali a few years ago 75% of the hard money equity lenders in the industry went kaput because their portfolios went into negative equity (they had lent more than the properties were worth on the majority of their loans and the losses couldnt offset the gains from the loans that kept performing).

(02-14-2013 09:21 PM)BIGINJAPAN Wrote:  Easy money: I use my own capital for the most part. I like to sell things off though to other long term investors who are also just single individuals, or family trusts. Although I have sold some bigger notes off to pension funds. I like to churn fees as much as possible.

How do you market your notes?

I have a list of investors I have collected over the years. I got the names of 200 investors from a buddy of mine who runs one of the biggest equity lenders in western Canada. I also used to be a realtor and had a lot of broker buddies who had clients that bought notes all the time.

Post: #28

Was reading real estate blogs and stumbled upon a blog post describing the process for buying notes in the US. Unfortunately, the writing style is not as captivating as BigInJapan but it might be useful if you found the OPs post interesting : http://www.biggerpockets.com/renewsblog/...low-notes/

Post: #29

Great thread BiginJapan. I was in the mortgage industry in the wild west years of 04-06, and I worked with several hard money lenders here in California but I never really understood the ins and outs of their industry. Fascinating stuff, I'm going to have to see if I can scale out this operation here in Los Angeles.

Post: #30

BiginJapan, have you ever invested in Non Performing Assets? I have considered doing this and was wondering what's your take on it?

Post: #31

How did you personally get started in this? Did you know someone else doing it and they took you under your wing and you saw a few deals first? Or just heard about it on your own and hit the ground running talking to lawyers?

Would there be any advantage to someone else who is currently doing this to take someone else on? Taking a cut of the profits while the new guy fronts the cash?

It seems like it would be a decent job, work your own hours, take time off whenever you want.

Post: #32

Lol at the suckers who pay $10k to borrow $100k and pay 10% interest on $110k.

Post: #33

Great post. I am wondering how do you protect yourself if the borrower goes to 5 lenders like yourself at the same time to secure such a loan. Is there a chance of this slipping through before all the lending parties realize what's up? I'd assume there is a clause in the agreement that covers that aspect..

Post: #34

In USA capital gains are lower so that's good. But I would be hesitant. Especially in a blue state. Taking someones home is not very easy. The judges are not quick to do so.

Post: #35

(06-23-2013 01:04 AM)cafedelmar Wrote:  Great post. I am wondering how do you protect yourself if the borrower goes to 5 lenders like yourself at the same time to secure such a loan. Is there a chance of this slipping through before all the lending parties realize what's up? I'd assume there is a clause in the agreement that covers that aspect..

Yes and no...

You won't know they are looking at other loan packages and they may be able to get loans from multiple sources at the same time.

You can protect yourself by making sure your security instrument is recorded first. You will then be paid off first before any other liens besides tax or condo liens. This will be done at closing by a lawyer or title company.