Posted by Tony Colella on August 25, 2009 at 19:06:59:
The reason for HML’s not doing owner occupied properties may be due to what attorney Bruce Berger told me is the case here in North Carolina. Hard money lenders can lend to investors but need to be a licensed lender to lend money to owner occupants.
This is a means to keep private money away from the traditional banking market and no doubt done to “protect” the owner occupant buyer from usury or predatory private/unregulated lenders.
Tony
financing for land home deal - Posted by Gene
Posted by Gene on August 21, 2009 at 17:44:39:
I have a newer double wide on land and I cannot find any lenders that will lend on it because it is non-owner occupied.
I paid cash for it and I planned on reselling but I would like to keep it as a rental and pull my cash out of it for another deal.
I am aware of HML but I am wondering if there are any banks that handle these homes. I am surprised that every one I talked to have blanket policies in this regard. You would think they would just increase the rates or lower the LTV to compensate for what ever perceived risk they think exist.
Re: financing for land home deal - Posted by Celeste-fl
Posted by Celeste-fl on August 23, 2009 at 15:51:45:
Get your name out there for private money. Talk to realtors and title companies. I don’t take on loans anymore, but I know of two private lenders here that are offering 7% on a 20 year fix with no up front fees and LTV at 80%. They are local and will not lend out of the area. If I can find them without really looking, guess what you can do by looking.
Re: financing for land home deal - Posted by shawn sisco
Posted by shawn sisco on August 21, 2009 at 19:16:00:
Do an archives search of “Land Bank” and you will find some ideas and strategies. Also, Tony Collela has written a book by that title that is for sale on this site.
Re: financing for land home deal - Posted by Gene
Posted by Gene on August 24, 2009 at 24:53:42:
That is a crazy good deal for private money. I have pursued and used private money in the past but never had terms like you are talking about.
They could put their money with a HML broker and make 12%+ and have more secure LTVs.
Did you negotiate these rates? Or was that all they were asking?
Were they family?
Re: financing for land home deal - Posted by Gene
Posted by Gene on August 21, 2009 at 23:06:08:
I have searched the archives.
The few suggestions are hard money, private money and local banks. Most posts are a few years old.
I was just wondering if anyone has worked with a lender that will do non owner occupied manufactured homes recently.
Re: financing for land home deal - Posted by Celeste-Fl
Posted by Celeste-Fl on August 24, 2009 at 06:49:05:
That is what they are asking. I guess they don’t want to put it with a hard money broker. They are experience lenders, one with nine years in. They are not family. They heard of me and got in contact. I looked them up and they have done many deals like this. I don’t know why they are only charging 7% and I’m not going to ask.
Re: financing for land home deal - Posted by Steve-WA
Posted by Steve-WA on August 23, 2009 at 10:00:42:
Up until a year or two ago, I had been using a local credit union; they were willing - at that time - to recognize my business model and plan, and refi LH properties and finance purchase when I bought for 50-60% LTV. BUT then a “new lending VP” came in a put the kibosh on all of that. Haven’t talked to them in awhile . . . Perhaps your “small, local banks” aren’t working for you in these times either.
I’d sure like to find that brass ring too, because these ARE cash cows, especially when buying cheaply.
Be careful with American General and the like - Tony and Scott’s model is/was to use these “commercial hard money lenders” and their higher rates to purchase, then later (after seasoning) refi at a regular rate with local lender interested in supporting small local business and building the community. Without that refi piece, you may not want to go this way.
Re: financing for land home deal - Posted by shawn sisco
Posted by shawn sisco on August 22, 2009 at 05:25:11:
The strategy that I recall Tony and Scott suggesting was of utilization of American General or other “mouse house” type finance companies. The way it was presented it had a lot of merit.
Re: financing for land home deal - Posted by Tony Colella
Posted by Tony Colella on August 24, 2009 at 16:05:46:
I do take an exception to Steve’s advice regarding using the “commercial hard money lenders” as I think he is taking it out of context.
If you find a good deal that cash flows and the only money you can find to make that deal happen is “commercial hard money loan” like we did with American General, you still need to approach the entire deal as we do and teach, not just to refi.
Steve pulled a great deal of money using the refi and from what I have read, even bought a house in Hawaii with it. His focus was on the refi cash. Ours focus was on the cash flow always and to a lesser degree, the refi that would allow us to obtain cash to do more income producing deals.
The American General deals we did were structured just like a traditional mortgage with no balloons or prepayment penalties. The interest rate was 11% amortized over 15 or 20 years (did several loans).
Our deals cash flow well at this rate so if we never were able to refi the property we still had a great deal.
I don’t know if you would find any traditional “hard money” that would give you this kind of mortgage but maybe some friendly “soft money” would (that being people who know you already).
It is harder to find mortgages for all kinds of deals right now I don’t care what the gov’t says. Banks are under tighter and tighter restrictions and the first place they hit is the investors it seems. Does this mean we can’t do deals? Nope. Does this mean no one is lending? Nope. It means we are going to have to focus more, work harder and get used to hearing more “no’s” before we get a “yes” but remember, we only need one “yes” to make it happen.
Folks don’t assume all lenders are out of this market just because a few, face to face interviews (and don’t you dare call them on the phone to ask or ask the lady or guy who’s office is a desk in the lobby) gets you a “no.” March out of that lender and go to the next in person. Keep trying like your life depends on it and you may well find your next best friend.
I talked with Karl (OH) just a couple of days ago and he has a land/home deal right now he is doing through a local bank that worked just fine.
You will have to work to find your lenders and once you have them, expect to have to find another a few years down the road no matter how great your business is doing. For some reason I don’t understand, this is the law of the lending jungle. Lend to those who can’t afford it and stop doing deals with those who have proven track records with your bank. Go figure.
Tony
Re: financing for land home deal - Posted by Gene
Posted by Gene on August 24, 2009 at 24:49:34:
I have talked to the two local banks in my area and they are very strict right now.
One of the in-house loan officer said they cut their available loan programs from over 70 down to under 20 (including car, house, business, and unsecured) in the last year and a half.
The nearest good size city is about an hour away and there are many more small banks to chose from down there…I am hoping one will work with me.
Re: financing for land home deal - Posted by Gene
Posted by Gene on August 23, 2009 at 02:12:23:
Thanks I will check in American General.
Has anyone used this type of financing lately? I know my local banks have really been cutting programs.
allow me to correct myself - Posted by Steve-WA
Posted by Steve-WA on August 25, 2009 at 18:40:48:
As you often do, Tony, you put the right words right into my mouth. I did state out of context; guess I need to go back to the book! I did not recall when typing that you were using 11% AG money for the long term. I apologize; this is another example of somebody giving advice that is off the mark - sorry.
One must ABSOLUTELY determine if the numbers of the deal will work, whether it’s at commercial hard money rates, or other. My intent in posting was to caution the OP on money availability now vs a year or two or three ago - it is definitely different. But that is not to say that it is not out there, it definitely is.
Re: financing for land home deal - Posted by Gene
Posted by Gene on August 25, 2009 at 12:48:38:
Thanks Tony.
What rate are you shooting for when dealing with local banks? Similar to American General? I can live with that.
Also if you recall what LTV would you expect?
I hear you about it being a numbers game. I can handle rejection fine…there is just very few small banks in my rural area so I would like to get my ducks in order before approaching them.
I currently have 7 land/home packages which I either own outright or with small balances remaining from owner financing. All cashflow great and I have a well constructed and comprehensive business/operation plan.
My area appears to be bottoming out in terms of price (sales bottomed a few months ago) so I am looking to get some cash together for new acquisitions.
Thanks again
Gene
Re: allow me to correct myself - Posted by Tony Colella
Posted by Tony Colella on August 25, 2009 at 19:13:46:
I agree times have changed in all lending related markets. I also agree that hard money is called that for a reason and I doubt that true hard money would have worked in most of my deals because I was investing for cash flow.
Hard money’s hayday was the flipping market of years passed. People could afford to give away huge chunks because the profit was so large. This simply did not work for me, again because I looked at cash flow first.
I know several hard money lenders who ended up holding the bag on many stick built houses when the market changed. We used to think that would be a good thing but not in this market. Many hard money lenders got caught without a chair when the music stopped. Foreclosure will happen but they are reluctant to do so because they know the property will need more money, time and effort to get their money back and then there are issues with taxes, inspectors etc.
Tony
Re: financing for land home deal - Posted by Tony Colella
Posted by Tony Colella on August 25, 2009 at 13:06:53:
I would still walk into the deal backwards as I normally do by running the numbers (checkbook analysis) gross income, less uncollectible, less expenses, pay myself first and what is left pays the mortgage.
Once I have that amount I know for sure exactly what the property can afford. I then plug in what the banks are offering. If they only give me a 20 year amortization then this will affect the cash flow more than a 30 year of course, so I plug that in. In a few seconds I can tell the max interest rate the property can support. I do this for any variable I need to find the max figure for. This makes it easy to know if the loan will work or not when you are sitting face to face.
If sales are bottomed out then I would agree it would be a good time to buy.
I am not looking to finance more property at the moment. I am looking at getting my properties free and clear of debts. Don’t get me wrong though, if I find a great deal I will consider it and seek financing but for the next 6 months or more my portfolio will not increase in size.
Tony
Re: financing for land home deal - Posted by Gene
Posted by Gene on August 25, 2009 at 13:54:06:
I have made most of my money thru retailing houses and mobiles in my area. But sense 2007 I have been acquiring these highly discounted cashflow properties to ride out the downturn.
I am not sure if my area is there yet (really want to see the fall numbers to see if this was seasonal or a true bottom) but when it is…its go time for cranking up my retailing business.
Getting some cash out of these rentals would be idea…but there are lots of ways to raise financing for good deals.
I honestly didn’t know financing was so difficult when I was buying these. I figured if they were newer financible double wides with foundations I would be find…It surprised me when I found out that few banks will consider lending on non-owner occupied mobiles. With all the new foreclosure rules that restrict the banks abilities to foreclose on owner occupants…I would think the reverse would be true.
I have noticed that a lot of HMLs lately will not do loans for owner occupied…only investor loans are allowed.