small notes? - Posted by lukeNC

Real Estate Investing Notes
1

Posted by james (CA) on March 28, 2010 at 01:31:35:

Another possibility is to do personal loan say up to $500 to pay back in 15-30 days, and charge 400-500% :slight_smile:

Is there an easy way to automatically withdraw from a borrower’s check account provided he gives me his voided check with routing number and other good stuff. I like to be able to electronically transfer money to them, and auto withdraw from theirs as well. Is there a form they have to sign to set this up. I can also ask them for a post dated check I guess.

2

small notes? - Posted by lukeNC

Posted by lukeNC on March 24, 2010 at 16:23:13:

what is the feasibility of becoming a small lender. I’m thinking of getting into becoming a licensed lender specializing in small loans $500-$2000. I know the profits are likely less but I could fund many loans and probably do quite well. Or offering financing on certain items, (tv’s, appliances, etc. )

Anyone else doing this?

3

Re: small notes? - Posted by james (CA)

Posted by james (CA) on March 25, 2010 at 15:00:40:

Good topic - how do you structure notes, minimize risk(get paid), criteria, collateral, marketing, who are your clients?

I am in SO CA and looking into cash flow income.

4

I like small loans - Posted by John Merchant

Posted by John Merchant on March 25, 2010 at 12:39:03:

Some of my best deals have been small loans and I’ve got 2 or 3 going now that I grieve are to soon be paid off!

One borrower will probably be a repeat customer as the current one is his 2d or 3d loan from me and the roustabout-handyman has paid just as agreed.

I’d advise your looking at NC law carefully to see if you’d really need any kind of state license as you might not and might be better off w/o one.

Also have a good look at NC usury law to see what your interest rates can be and still stay legal.

In my State of WA our current small & personalty (not realty) secured loans are basically uncapped at the volume I’m interested in so I can set the rates I want.

5

How I make small loans - Posted by John Merchant

Posted by John Merchant on March 26, 2010 at 14:43:58:

On the small loans I’ve made I get borrower’s credit report (make him/her get free one and give me copy), their last 2 years income tax returns, current pay-stubs showing their salaried income and I take the title to a vehicle at county motor vehicle desk.

Plus I do some calling to their references to make sure they’re telling me the truth about their employment, etc.

On marketing I find that Craigs List is quite effective for finding borrowers, lenders, almot anything else.

And its simple to find good promissory note forms online for small cost…or law library form books are filled with them also.

6

Re: I like small loans-Prosper?? - Posted by christopher w

Posted by christopher w on March 29, 2010 at 10:27:57:

What about doing committing to a bunch of smaller amounts like 10 @ $50 a piece on a site like Prosper? The rates are pretty decent? Plus the notes can be sold at a later date on their web-site? I am not trying to promote Prosper I have been thinking about doing this and any advice I could get from one of the professionals on this site would be great.

7

Re: I like small loans - Posted by lukeNC

Posted by lukeNC on March 25, 2010 at 14:38:19:

I’m not sure on the licensing just yet. however I do know that most loans under $25k have a cap at 16%. I may be able to do 18% as the max though.

What kind of interest rates are you charging?

8

Re: How I make small loans - Posted by Bob Smith

Posted by Bob Smith on March 26, 2010 at 20:09:51:

Licensing? I’d be surprised if you could do those without one.

9

Re: How I make small loans - Posted by james (CA)

Posted by james (CA) on March 26, 2010 at 15:27:06:

Also a borrow needs to buy car insurance, and have you name on it as well?
If the policy lapses, what will happen?

10

Re: How I make small loans - Posted by james (CA)

Posted by james (CA) on March 26, 2010 at 15:22:01:

Good info. What is the maximum loan amount, terms 2-3 years, interest rate? Any particular cars, model, year built, condition, purchase price? What to do if a client defaults - hire a repo man? Other different types of small loan do you do?

I am in CA, and not sure if they allow individual loan like this, and maximum interest rate allow. Need to check usury law.

Thanks

11

Be wary of relinquishing control - Posted by John Merchant

Posted by John Merchant on May 05, 2010 at 14:05:14:

These deals scare me as I want to know each and every detail of all loans before I commit to making them.

This sounds like they (Prosper?) would be making all the decisions, not you, and I’d say don’t do it.

12

Lender named as add’l insured - Posted by John Merchant

Posted by John Merchant on March 26, 2010 at 20:50:04:

This is a condition of any vehicle loan I do, and I have B sign a letter to his agent naming me as add’l insured and getting me copy of B’s policy.

But I’m thinking this thread is going the wrong direction…I’m NOT financing any big or expensive or new cars but just making the occasional small loan on already owned car or truck where I like the B and his situation.

I’m sure not taking the bank’s role in bcoming the new car buyer’s funding and don’t recommend this for anybody else.

13

Before you start… - Posted by John Merchant

Posted by John Merchant on March 26, 2010 at 17:04:23:

When first approached about this I was pretty nervous, with the same questions you have.

I first determined our current lending laws here in WA have no usury caps on personal property loans.

Then I talked to a used-car dealer friend from church to see about repo if/when necessary, etc.

He told me that he’s never had to repo one and generally the borrower, knowing he’s in too deep, will either bring the car back to his lot or call him and arrange to get him the keys and vehicle so no “Repomen” strong-arm stuff is involved. This has been my experience too and although a borrower might be a few days late I’ll get paid w/o hassle.

On the value of the collateral I’ve also by dealer buddy what he could sell a particular make and model for and he’s advised me in some detail.

With a newer car your banker will have a USDA Blue Book giving you sales and loan value of the vehicle.

So I’d just advise you to start small, and then loan only to somebody you meet and really like on some collaeral you likewise like.

If your borrower is too weak, make him/her produce a co-signer with better FICO, income, background and situation. Otherwise don’t make that loan.

Your loan length will depend on monthly payments it takes to get you the interest rate you want and borrower’s ability to make that M pmt w/o pain…here you’ll just have to sit down with the B and go through his income & expenses so you can determine what B can pay.

I’ve had Bs tell me “Oh, no problem and I can pay $750 a month” but then when I go through his/her income and expenses I find that $250 or so is about all that’s available.

This is basically about the same procedure you’d use in selling a “lonnie Deal” mobile home and once you do one or two of these and develop some comfort you’ll probably move into that area.