Posted by Marek Kaziniec on August 28, 2000 at 19:25:11:
Thanx again Mr Gatten,
digesting the information at the moment and it is making more sence now.
just out of interest - Posted by Marek Kaziniec
Posted by Marek Kaziniec on August 23, 2000 at 22:45:03:
Please be patiant Iam new at this:) OK, this is the scenario that perhaps you will have the answer for.
Lets say there is a property worth $150,000 and it sells for $100,000. After taking care of all the bills and loan repayments the renters bring in +$100/month. Would a bank lend the money for such a property against the value of the property ie: if all goes bad they get the loan back on sale of the property?
Also, without having any personal assets or income comming in would a bank lend money for such an investment?
Thank you in advance,
Marek.
Re: just out of interest - Posted by Bill Gatten
Posted by Bill Gatten on August 24, 2000 at 16:57:27:
A bank per se probably would not, as they are bound to their investors to be assured that payment capacity is verifiable; however, given your ability and willingness to make higher payments, a “hard money” lender would perhaps lend to a 75% LTV (Loan to Value Ratio…what you described is 75% LTV): most like 65%and 70% LTV’s better though.
Bill Gatten
Re: just out of interest - Posted by Marek Kaziniec
Posted by Marek Kaziniec on August 25, 2000 at 01:40:26:
Thank you Mr Gatten for the fast reply. I wander if you could expend on the “hard money” lender and perhaps hint on what are their usual terms and conditions.
Thank you again,
Marek.
Re: just out of interest - Posted by Bill Gatten
Posted by Bill Gatten on August 25, 2000 at 11:36:54:
Hard Money lenders loan on the property alone: a little like a pawn shop. If you don’t pay, they take the property…with plenty of equity in it. They’re not concerned about your credit. They charge between 11% and 16%; 'want between 5 and 10 points (or more) up front; and will usually loan only 65% to 70% of the property’s appraised value (sometime 75%). About all they ask for is clean title…and they are usually area specific (i.e., they loan in their favorite cities only). In other words, they don’t take many chances.
Traditional lenders require a postive answer to these 3 questions in order to issue loan approval: 1) CAN he pay? 2) WILL he pay? and 3) how can we MAKE him pay? The hard money lender merely asks: “Are you sure you’re ready to lose your property WHEN YOU DON’T pay?”
Bill Gatten
Re: just out of interest - Posted by Marek Kaziniec
Posted by Marek Kaziniec on August 25, 2000 at 21:13:54:
Thank you again,
it doesn’t sound all that smart after all. Gess I’m looking to gamble more than to invest with this idea.
Perhaps wait until learn more about other options which are more investing sound.
What would be a smarter way to go ahead with foreclosure deals?
Perhaps to secure the sale on the auction day and sell the property straight away before the time up to pay the auctioned price? or am I again being inpatiant.
Anyway, if you have any more thoughts I would greatly appritiate,
Marek.
Re: just out of interest - Posted by Bill Gatten
Posted by Bill Gatten on August 28, 2000 at 12:48:23:
As far as dealing with Foreclosures is concerned, my own favorite way is to acquire a property that is headed for foreclosure, but not there yet. I arrange with the owner to have him place the property into his own land trust (my being assigned 90% of the beneficiary interest, leaving him with 10%?with an agreement that he will relinquish his 10% to me at termination…). Next, I bring in a third party (3rd bene.) to live in the property, handle all the costs of Reinstatement and Closing?who will also cover all payments, management and maintenance, in exchange for ownership and income tax write-off?and, say, half of the future Appreciation (in 5,6 or 7 years).
In this scenario, I end up with:
Any equity that I ?create? in the beginning (loan pay off is $150K, my 3rd bene. comes in at a Mutually Agreed Value of $170K?this gives me $20K equity to start with) ;
Any money I charge the 3rd bene. Which is over and above Closing Costs and Reinstatement;
Any positive cash-flow I can generate (payments are $1290?the 3rd bene. Pay $1490?gives me $200 p. mo.);
A 50% share in Future Appreciation, I
And 50% of the equity build-up from loan principal reduction when the property sells (or is re-fi?d by the 3rd bene.) at termination.
I like ?em when I can get ?em for Nothing Down, No Bank Qualifying, No payments, No Negative Cash Flow and No direct responsibilities to management, maintenance, repairs and upkeep. In other words, I like to plant ?em. watch ?em grow (if they?re going to), pick ?em when they?re ripe, put those pretty green flowers in my cute little basket and skip on down the Road to retirement (i.e., as in Kiyosaki?s 4th Quadrant).
Bill Gatten