Question About Buying With Other Peoples Money.
I need a little guidance on how to put this whole thing together.
I have a guy that I borrow the money from to do my deals. I told him that every deal is going to be secured by the first trust deed.
Next thing I go and buy a house at 70% LTV. Call my guy; ask him to wire the money into the escrow account. Grant Deed stays under my name. Is that how the process should work? Am I missing any steps?.
Thank you,
Alexander.
Anyone?
Hi, I think the hard money lender would keep the title asa security.
My question to you is, I wonder if it's at all possible to find 70% value homes in CA. If so where?
Please share your strategy.
Thanks
Alexander,
In this situation, the private investor would act same as a third-party lender. In other words – you would buy the property and keep the title as in any other similar transaction. Your investor, by negotiating acceptable funding terms with you, would pay for your purchase and keep your promissory note, secured by the 1-st lien mortgage. As a result, you will be making payments to him directly, if such payments are required by the note terms, until you sell or refinance the property, at which point you will pay back the remaining balance to him.
One other thing that you and / or your investor should know is that once such note is created, it can be sold to other private investors (that is the market that I normally work in). And although the paper would be then sold at a discount, if your deal provides some profit sharing to your investor, quick return of large investment could be to both of your advantage, if you have other opportunities to work on (you would run the numbers to make sure it makes sense).
Also, even if you cannot normally qualify for a conventionally originated mortgage, often with 5-10% down you could be able to negotiate a deal with a party, from whom you buy the property, to agree to give you a seller-financed note for the entire remaining balance. Such note can easily be bought simultaneously at the RE sales closing table (bought from the property seller, providing him with cash proceeds at the closing). It is normal throughout the industry to provide you a written pricing quote before you sign an offer. Nothing also prohibits you in such a deal to agree with the property seller to give you a refund at closing.
I hope this insider info helps.
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