Private Money Lending and the Investment Property Loan

When you start looking for your next investment property, you will undoubtedly find that locating an investment property loan is not as effortless as it once was. There are a lot of companies funding loans for investment properties and you can definitely get approved, but you will need to take note of the current expectations of lenders.

The days of no down payment or low cash down options are a thing of the past. You’ll be expected to put 20%-30% down and you will need to have good credit. If your credit is decent, but not fantastic, then expect to put even more cash down. Is it still possible to obtain an investment property loan without a down payment? Actually, yes, but these loans are typically obtained from a commercial lender that will accept cross collateral (a lien on an additional property that you already own) instead of a down payment.

Your best bet will be to look for a mortgage broker that specializes in investment property loans in your area. They will typically know of all the lenders that offer financing options that will meet your requirements, and will be able to assemble the best deal for your situation.

In addition to knowing the best financing options, they may also have other clients that both purchase investment property and fund private investment property loans themselves. Savvy lenders will often have some private lenders in their pocket to bring in when conventional loan options are not available.

Private lenders often have funds on deposit in a self directed IRA account specifically for backing private notes for individual investors that cannot get a conventional investment property loan. Depending on the interest rate they request, this could be a win-win scenario for everyone involved, so stay open-minded.

Be sure to ask around, search the web, and locate the best options for you. Don’t get frustrated if you are unable to find the perfect solution right away. The best option for you may exist in a single relationship that is right under your nose. Do your research, understand your boundaries, and take it at your own pace.

Does the New “Safe Act” Make Private Money Lending and Seller Financing Illegal?

Have you heard about the “SAFE Act” yet?  If you aren’t familiar with it, you need to be…. and FAST!  Why?  This relatively new piece of legislation was original designed “to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state-licensed mortgage loan originators.”

So, what’s the problem with that?  Like much legislation that is designed to “protect consumers”, it can include some very negative effects on certain niche people or businesses.  In this case, the SAFE Act can potentially make Owner/Seller Financing ILLEGAL in some states (buyer or selling), and may also make it illegal for your Private Lenders to fund your deals without first obtaining a license to do so! This is a new twist on what we have seen with other recent legislation since YOUR LENDER can even get into trouble here, not just you!  However, if you want to keep operating your business with private capital and maintaining good relationships with those lenders, it would certainly be in your best interests to learn the new requirements in your state and understand how to navigate and/or legally bypass them so that you can safely continue to operate.

Although this Act came to exist back on July 20th, 2008 as a key component of HERA (Housing and Economic Recovery Act), HUD established a deadline for states to create and pass their OWN legislation that complies with the minimum standards of the SAFE Act no later than July 31st, 2009 for some states, and July 31st, 2010 for the rest.  That means that ALL states will have this new legislation in force by now, but because it was left to the individual states to define their own standards, every stay can and will have different rules.

If you intend to use private money or owner/seller financing, either buying or selling, in your business, you NEED to be on this webinar! This is cutting edge information that you won’t find anywhere else.  Most attorneys cannot advise you on this legislation yet as they are just now learning about it themselves!   Chris will not only discuss how the new Act may limit you, but also the tools and tactics that you will need in your real estate arsenal to avoid trouble. As with most things, the fix can be fairly simple, as long as you know the rules.

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