Posted by Steve on September 02, 2001 at 23:13:58:
Thanks very much for the insight, Ed. I will follow your advice. I’ve never written a business plan before, but have found a good model that you wrote of in an earlier post. I can visualize what I want to accomplish, I just need research it more, write it out and put it in it’s proper format. Should be interesting. Thanks again.
Steve
hypothecations - Posted by Steve
Posted by Steve on September 01, 2001 at 04:53:29:
I’m just curious to know if most lenders are willing to do hypothecations. I’m considering taking out a second mortgage on my home in order to buy a note and use the equity in that note to buy another. Would most lenders go for something of that nature, or are lenders who do this hard to find? Any information would be appreciated.
Thank you.
Re: hypothecations - Posted by Ed Garcia
Posted by Ed Garcia on September 01, 2001 at 12:21:24:
Steve,
Before I answer your question, I’d like to explain for those who don’t know, what a Hypothecation is.
To Hypothecate, is to pledge a thing as security without the necessity of giving up possession of it.
For example: A Hypothecation is found in many situations. A tenant may pledge leasehold rights as collateral for a loan. A lender may pledge rights in a receivable mortgage, deed of trust or land contract as collateral for another loan. A life tenant can mortgage his or her rights, as can a remainder-man. A farmer may pledge unharvested crops as collateral for a loan. In each of these cases, and others of similar design, the borrower retains possession, control and use of the collateral but capitalizes upon its value by borrowing against it.
I’ve done several loans where the borrower owned a mortgage or second mortgage, and rather then sell that mortgage, they borrowed against it.
Now, to answer your question. The type of lender that would consider a Hypothecation is a local portfolio lender such as a small bank.
Ed Garcia
Re: hypothecations - Posted by Steve
Posted by Steve on September 02, 2001 at 03:23:25:
Ed,
Thank you for the information. If you don’t mind one more question, do these lenders usually like to see a
formally written business plan, or is this something that I can do as a private individual? Thanks again for the help.
Steve
Re: hypothecations - Posted by Ed Garcia
Posted by Ed Garcia on September 02, 2001 at 10:45:28:
Steve,
To do a Business Plan would never hurt you.
A Business Plan tells exactly what you propose to do? How do you intend to do it? Your plan not only discloses your intentions, but how well you have thought out your venture. Unfortunately, most real-estate investors give scant thought to many aspects of their proposed investing criteria. It often becomes all too apparent in the business plan that the investor has not done their homework, therefore is not someone with whom you could trust their information or depend on.
More importantly, the business plan is essential to you planning. The things you would do in writing a business plan will force you to do many essential tasks that you would likely overlook otherwise. The very act of writing a plan for your proposed business will be most informative to you. Definitely, it instills a much-needed discipline to the often overly enthusiastic behavior of the “eager beaver investor”.
Most investors are not familiar as to how to write a business plan. As a result, they try to find someone to write it for them. There is much business for the person who can write good business plans. Unfortunately, much of the benefit of a business plan is lost if you have someone else write it for you. Sitting down and pounding out the plan, piece by piece, forces you to do considerable thinking and evaluation of your plans. Without exception, investors who have written their own business plans, report that they were forced to rethink many aspects of their venture when it became apparent to them that there were some serious flaws in their thinking. The parts did not fit together properly.
In closing Steve, a Business Plan is not necessary to borrow money or to do a Hypothecation. However if you should want to secure some private investors, or procure a WLOC (Working Line Of Credit), which is a credit line specifically designed to purchase property, it’s mandatory.
Good Luck,
Ed Garcia