Self Conflict.... Standing up for Plege/Anthem?

[furnishedowner]

christopher w,
So you sought out all those private party investors who carried notes so that you had a list to broker notes to?

And sometimes it was a bank or credit union that also bought or sold notes? (Yes, I was dissecting your post).

So you had your list to borrow HML (hard money loans) from?  Or to broker the loan, you getting paid the points?  Do I have a grasp of your business?

Wish you and/or rookieNYC would start a new thread on this.  This is a whole new learning curve for me.  And BOY, AM I INTERESTED!

I will check out the Tom Henderson info., too, thanks.

Furnishedowner

[christopher w]

Furnished,

I want to be the HML. The reason I had the list of HML's was so I could look for loans that they were the Lender on (also called the "Grantor"). Once they had closed the loan and recorded it I would follow the paper trail to the end investor. Like Rookie said; most of them sell the note after closing so they can lend it out again. 15-18% annually is nice, but think about if you can turn 100K at 5 points 10 times in a year. That is 5K per deal X 10=50K. That is a 50% return in a year.  So before I close my loans I will have buyers or investors lined up to take the paper off my hands. Trust me it is so easy you will be shocked. People think the hard part is finding the investors but it is not. I think the hard part is getting them to trust you enough to buy your paper. Once you get one or two under your belt and your name is out on the street as someone who gets deals done you will have more business then you know what to do with. Like Rookie said; he now has people coming to him with opportunities because they know he can make things happen.

Rookie and I need to write an Ebook and start marketing it

I know what you mean about this whole new world. It is amazing how money is bought and sold these days. I just hope that I am not getting in too late in the game.

[furnishedowner]

christopher w,
Say you have $50,000 sitting in a savings account at 3% annual interest. After 12 months, now you have $51,500.

You don't like that, so you become a hard money lender.  You lend out your $50,000 to a house flipper at 5 points (1 point=1% of the loan amount) upfront, plus 18% annual interest.  (Isn't 18% usary, by the way?)

The 5 points is subtracted from the amount lent out, so the flipper gets funded $47,500 cash. After 12 months, he has to pay you back 1.18% of what he borrowed, $56,050. And you still have the $2,500, which has grown to $2575.

Now after 12 months, the flipper has rehabbed and sold the house.  He pays off your loan of $56,050. Plus the $2575 you now have $58,625 instead of $51,500.  You just made $8,625 instead of $1,500 and you have the $50,000 to lend out again.

Is this correct?  Am I missing something?

Furnishedowner

Furnishedowner

[christopher w]

Furnished,

In Texas 18% is the max rate before it is considered Usury. Your numbers are almost correct. The way that Rookie does it and I feel comfortable saying that because he posted it himself earlier in this thread is to also collect your 12 months of interest up front PLUS your points. So the flipper gets $50,000 - $2,500 (points) - $9,000 (12 months interest up front) so NO MATTER WHAT you get paid. But your goal is not to hold that paper for 12 months. You want to sell the paper get your money back and repeat. Keep in mind your not going to make much on the paper because you have to make the deal sweet for your investor but if you do one deal a month you are making $2,500 X 12 = $30,000. At the end of the first year you now have $80,000. You will double your original 50k in less than 18 months on just the points alone.

[furnishedowner]

christopher w,
You charge upfront interest on the whole $50,000 even though you have subtracted the points?

I'm trying to follow the thread of this...then you sell the note secured by the property, right?  The note is for 50k, you have your upfront points and interest already.

How much of a discount would that note buyer want?  $5,000?  More? So you would get your cash back to repeat with the next transaction.  Rather than wait out the 12 months.  Do you transfer the trust deed or mortgage securing the note?

There must be state/federal laws governing private note sales, or is it determined by the marketplace?

Thanks for settling my curiosity on this fascinating subject.

Furnishedowner

[christopher w]

Furnished,

Yes, you charge interest on the whole amount. Whether you subtract the points or whether they bring them to closing is a wash. They still have to pay them. By you subtracting them from the loan amount just saves them the time of having to wire the funds or get a cashiers check to bring to closing. The discount on the note depends on the buyer.

There is a new guy posting here named RobInAtlanta that has posted some great information on notes and yield. He actually called me and walked me throught he process of calculating yield using a financial calculator. It was great.

[furnishedowner]

Thanks, I'm going to keep studying this subject.  A nice plan to make money with money, rather than with real estate.

Furnishedowner