private lending questions - Posted by Bob Johnson

Posted by GMann on May 23, 2006 at 16:01:28:

I think the problem is the 2nd position. I don’t know too many hard money lenders that actively allow a 2nd position. I know I sure wouldn’t unless the first is small and the total exposure is 65%

private lending questions - Posted by Bob Johnson

Posted by Bob Johnson on May 22, 2006 at 15:42:14:

We rehab and have had good success combining bank construcion financing with private lenders in a 2nd position. Usually, the 2nd is a full recourse loan for 30% of the purchase price (not including repairs), with 0-3% origination and 12-15% interest only.

We had 3 individuals lined up to provide this financing, but all three are tapped out at the moment. Fortunately, I think I’ve found another individual to provide this funding on our current deal, but having the “well go dry” sort of made me start thinking.

We’re on track to be doing 4-5 rehabs concurrently next year, for a total of 12-15 projects. If we’re going to use this same funding strategy (which has worked really, really well so far) - we’re going to have to find some more private lenders. I’d really like to have a list of 7-10 individuals, but I don’t really know where to find them.

I’ve thought about putting together a page on our web site, and perhaps running an ad in the local papers. But, an attorney fried warned me that advertising for funding would probably be a violation of securities laws, and putting it on a web site could even be a violation of federal securities laws. Now, I’m really getting concerned…

We only use a single 2nd-position lender per deal, we don’t put multiple lenders together. The loan is secured by the property but also is a full recourse loan secured by the owners of the company. So, my first question is whether offering these loans to individuals really could be a violation of state and federal securities laws.

If we’re ok on the securities aspect, I still wonder how to find additional private lenders. I’ve tried spreading the word with our attorney, title company and bankers with no result so far. All ideas would be gratefully accepted.

Re: private lending questions - Posted by Chris

Posted by Chris on May 22, 2006 at 15:50:35:

Try every investor you know that does more deals per year than you. Many of them are bigger companies and wouldnt mind lending to you for some extra profits.