I found Private $$$ - now what ?? - Posted by Heidi W

import · December 28, 2001, 12:23pm

Posted by Heidi W on December 28, 2001 at 14:46:36:

OK, I’ve got it…

#1) Get the deal contracted (with financing contigency)

#2) Shop till I drop

#3) If Private Investor interested - then get letter of commitment/proof of funds

Thanks!

Heidi

import · December 28, 2001, 12:23pm

I found Private $$$ - now what ?? - Posted by Heidi W

Posted by Heidi W on December 28, 2001 at 13:23:04:

I just made a contact with a Builder willing to fund my deals with up to $500K. I said I’d pay 12-15% interest for a relatively short term loan. He said, that sounds good.

Originally I was planning on doing mostly L/O’s because I didn’t want to have to go to a bank and qualify for a loan. But since my ad (which I plan to start running shortly) will bring in people who want cash offers, not just L/Os - I’ll probably run across some deals worth looking at.

Any tips on how I should test these ‘private money’ waters?

Thanks,
Heidi W

import · December 28, 2001, 2:33pm

Re: I found Private $$$ - now what ?? - Posted by Ben (FL)

Posted by Ben (FL) on December 28, 2001 at 15:33:26:

I am looking for a partner for $5,000 down payment. Property will support 15% interest only payments with a 2 year ballon. I would be happy to pay you a fee for finding me the money.

import · December 28, 2001, 1:30pm

Re: I found Private $$$ - now what ?? - Posted by Dave Swett

Posted by Dave Swett on December 28, 2001 at 14:30:01:

Take him a deal and let him give you a quote and he will begin to outline the terms and conditions that he will need to work his loan with you.

I, too, am/was a hard money lender. I think that you will learn that the most that he will loan you is say 70% of his estimate of FMV. So you will need to figure out how you will handle that last 30% of the deal.

A private lender is very, very conservative. Their only recourse is the collateral and very little attention is given to the credit worthiness of the individual. The lender knows that you are approaching him because he is your last resource and that a foreclosure is his only defense for a bad business decision.

DJ

import · December 28, 2001, 12:52pm

Re: I found Private $$$ - now what ?? - Posted by GregNY

Posted by GregNY on December 28, 2001 at 13:52:19:

Heidi,

Have him give you some sort of letter of intent or proof of funds?

A lot of lenders I’ve come across have promised me the world.
Unless they can give me something in writing, I don’t give them much thought.
If he doesn’t want to provide you with anything to show he’s for real,
he will most likely (MY EXPERIENCE) flip the script.

My $0.02,

GregNY

import · December 28, 2001, 1:26pm

Re: I found Private $$$ - now what ?? - Posted by Heidi W

Posted by Heidi W on December 28, 2001 at 14:26:49:

Good Tip Greg!

When I have a potential deal, I’ll call him up and say…“Hi, remember you said you might want to get involved if the numbers are good… Well I’ve got a property that would require $350K in the next 15 days to close. This house is worth $500K and needs about $40K in work. So I’d need my private investor to put up around $400K overall.”

"Before I give you any specifics about the property - I’m going to need you to send my attorney a letter-of-intent and proof-of-funds information, OK?

Of course, you’re under no obligation to lend the money if you don’t like the deal - but I need security that you can do the loan before I make an offer on this house - or I’ll have to seek funds from a different private lender. Any problems with that?

Or something along these lines…

QUESTION - what do you mean by ‘flip the script?’

Heidi

import · December 28, 2001, 2:17pm

‘flip the script’ - Posted by GregNY

Posted by GregNY on December 28, 2001 at 15:17:10:

means, change his mind, say that you need to put X% down, or something that will have you holding the bag.

I wouldn’t wait until I had a deal under contract. You said you talked to a guy that would be willing to lend. I would have asked him for something right then and there.

Also, proof of funds will usually give the sellers lawyer some confidence in you. And, the lawyer will usually push ($ eyes) for a deal. My lawyer was telling me about this. A lawyer will work (believe it or not) if he knows the deal will close. It took me a while but doing it this way has saved me from wasting more peoples time and MINE.

I like things to run smoothly and I hate getting burned when it comes down to setting up a closing.
It’s nerve racking when you have a hot deal in your hand, cell phone in the other, and you’re driving around trying to get the dang thing funded. Don’t ask me how I know.

Good Luck,

GregNY

ps - nothing against what Dave has told you, this is just how I like things done.

import · December 28, 2001, 1:40pm

Re: I found Private $$$ - now what ?? - Posted by Dave Swett

Posted by Dave Swett on December 28, 2001 at 14:40:38:

Amazing, while I was posting my first email, you were doing the same with the above script.

I feel that you have the commitment scenario backwards. You need to have your deal fully defined before you tell ANYONE about the opportunity. Even at a casual morning coffee break, the guy in the next booth may hear you talking about the deal with your advisor and he will run out and snag the deal while you are formulating your course of action.

In this case, you should have a signed detailed offer that you can shop all day long and you are fully protected against someone doing an end run on you.

In your offer, you will have a financing contingency to allow you to safely discuss the deal with your builder/lender. If he likes it, then you can have the escrow/attorney demand the letter of commitment.

DJ