10% Return for every mortgage payment

[auggflo]

I'm trying to come with a good way's to borrow private money. What do you think about a 10% return for evey payment someone makes for me for up 9 months? This way the lender doesn't have to let go all their money at once.  

Thanks
auggflo

[Dmiller]

How would you write that up?  
How/When do you pay the invester back?
Secured by Real Estate or just a promisory note?
What is the Max LTV your looking for?

Your willing to pay 120% APR for 9 months, what are your monthy payments?  Interest only?


Your question peaks some interest, but I would want to see the structure before I loaned my money.  Whats in it for me (the investor)?  

[auggflo]

When 1st I should say that I'm new at REI and I'm looking for ways to use other peoples money at a low cost. What I have in so far is, I would secure it however the lender wants Real Estate or promisory note. I will pay them when the house is sold or up to 9 months. If the house is not sold in the 9th month I will refinance it and pull their money out. The lender will gain 10% on their money which is more then most savings accounts. I would only do this on a house that I can purchase at 70-75% LTV.

How does it sound so far.

Thanks
auggflo

[Dmiller]

Your on the right track, just need to fine tune your pitch.  Look into Hard Money Lenders and use that as a guideline to base yours on.  

You are very close to some HML's, except your looking to by-pass the points & fees...which are very steep with HML's.

Structure it with terms they know...ie APR and such.  10% on every month payment you make for me, up to 9mo's is a little confusing.  

Try: 10% APR for XYZ loan amount due in 6-12 months, with interest only payments (or no payment if you can talk them into it).  Secured by 1st mortgage position with Max LTV of 70% ARV.

Good Luck and happy investing.

[auggflo]

This might sound like a dumb question but I need to know. What benefits do you have as a 1st on a mortgage?

Thanks
auggflo

[Dmiller]

1st mortgage gets paid first from the auction proceeds (Tax liens and such, trump mortgages though) should it get foreclosed on.

example:

1st mortgage: 100K
2n mortgage: 50K

You stop paying, and I (1st position) foreclose and take it to auction...it is auctioned off at 100K.  I get my 100K.  BUT....if I was in 2nd position...I'd get squat.

[auggflo]

Gotta Love this forum.

Dmiller, Thanks a lot for your help.

Thanks
auggflo

[auggflo]

If your the 1st on the mortgage, do you control when the house can be sold?

Thanks
auggflo

[Dmiller]

You the Owner (holder of the deed) controls when its sold.

I as the mortgage lien holder gets paid when you sell, or I don't release the lien.  No Release no clear title = no title insurance for new buyer.

[auggflo]

Just wondering what other pro's and con's some of you see doing this.

Thanks
auggflo