Private financing questions

[darkness05]

Due to a recent bank error which saw my credit take a dip - I am possibly being forced into looking for private money to fund my latest deal. I have never been down this road before, so had a few questions for the experts out there.

First - is a 3% fee/8.5% interest generally the going rate on a deal these days? I am assuming that this number could vary widely depending on the deal and the applicant - but just curious if this sounds low, average or high for financing for a standard full duplex (600k).

Second, is it normal that the lender would want to tag 3-4 of my existing properties to cover themselves if something goes south?

That's all I can think of for now so I appreciate your comments or PM's

Thanks

 

[Tina Myrvang]

Hello,
I was an active Private lender in 2008 - 2009. I did charge a fee of 3% and the interest rate was more like 12%. So I would say this is a good interest rate. I never made any of my mortgage Inter-alia. It might be due to the first lender and the level of risk involved? I would question it further. Find out why they feel it is necessary.

 

[Thomas Beyer]

yes 3% upfront plus 8%+ on a house is NOT unusual if your credit is not pristine.

In my opinion, real estate makes NO SENSE if the borrowing rate exceeds the cap rate of the asset (NOI / price), unless it is a redevelopment deal where you can refinance in short order.

 

[darkness05]

Thanks for the info - yes this is a very short term thing - 2 months max at the 8.5% rate then back into a traditional rate of 2.6%.

 

[Martin1968]

@darkness05

As long as you are sure you can indeed refinance. Private money would not be my cup of tea. Last time I talked to someone they borrowed Private money on a 1 yr deal, but had a hard time qualifying through traditional channels before the year was up, still ending up with a high interest rate after that.
This deal must be worth it, otherwise I would say wait it out. If not for this deal being available in a few months then for sure other opportunities will come up.

It would also give you time to repair the mix ups on your creditreport.
If you don't already have this, subscribe to a monthly credit file monitoring service.
Just so you can stay on top of things.

 

[Cory Sperle]

Hi, how much are you looking for and what makes you certain you will be able to refinance in 2 months?

 

[darkness05]

@Martin1968 - yes I have already gotten confirmation from my A lender that as soon as the score jumps 20 points its a done deal and they will take it over. I had a heated meeting earlier this month with the manager from the bank that made the mistake - and all the proper documentation has now been sent in to Equifax to have it adjusted. Just not sure if it will happen quick enough. I have the monitoring package up and running as of a few weeks ago just to avoid issues like this again in the future!!

@CorySperle - Hey Corey - I will PM you.

 

[Courtney Hammond]

The credit updates are often done quarterly- so it would depend on when the last updated to when the fixed issue will be reflected in the credit score. We had similar issues with bank errors when an account was transferred - and closed... some how it registered as an amount owing... but luckily in our case the underwriter just required a signed paper from the bank that the account didn't have anything owing... which the our bank did and added that the account actually no longer exists and has nothing owing but it took several months for the error to be corrected and reflected in our score.

 

[darkness05]

Thanks for the info. I have heard conflicting info - some others have mentioned that the score change happened within days of the bank sending in the required docs. Maybe it was just really good timing for them - we will just have to wait and see! Fingers crossed!!

 

[happylandlord]

Hi, feel your pain with the credit mix up and I went through same thing many years ago. I was able to request a free credit report and was given a contact and form from equifax and they updated my file within 10 days. They even sent me an updated report to show the change. I have been ordering my report annually since for free as part of my financial check up.

happy_landord