Private Mortgage Investing

[OAG]

Quote:

Originally Posted by AJ290 Who mentioned anything about a "second trust". These are all first position mortgages.

#7. But I see you did not, sorry. I still am kinda of skeptical that this will end well but, if it is a friend, as I think you did mention, maybe it all will work out. Hope that it does as, under these circumstances, if there is financial loss, you may lose more than money.

I did work in RE (RE Broker Agent in Northern VA) in the 70 and 80's, was involved in RE financing of 1st and 2d positions, in both commercial and residential properties to include land sales, and it did work out just fine for me. But, we had a small shop and were dealing with a very trustworthy group of borrowers, for the most part. I just think today it is a lot different and I, for one, would leave it alone.

[honobob]

Quote:

Originally Posted by chinaco Run.... Remember, you are talking to successful, conservative investors.

Read the "pay or not pay off the mortgage" thread to see how conservative.

Just like all successful opportunities there's always someone jumping in to find a way to scam without doing the work and then that gives a bad name to all projects of that type. You're talking about mortgage lending. Is that such a wacky/crazy deal? I see it all the time.

Just like any business you need to be aware of all the scams and pitfalls. Everyone sees the 11% and think it's too good to be true so it must be risky. The people I know who mortgage lend get the double digit rates but are subject to having it handed back to them at any time and having to earn low rates in liquid accounts to be ready to fund the next deal. This has been the downside that has kept me out because I haven't found someone that can keep my money busy all the time. Other than that I'm all for keeping the institutional lenders out of the deal.



4% Appreciation my *ss!

[nepo]

Quote:

Originally Posted by walkinwood AJ290 You seemed to have already decided this is a good investment, so I don't understand why you are asking this board for our thoughts.

My sentiments exactly.

And there's no point in adding anything to this discussion.

[kaneohe]

Quote:

Originally Posted by poboy Fishing perhaps? The exact post is here

poboy-------just curious (haven't looked at the link yet) ....
how did you find it?

[poboy]

Quote:

Originally Posted by kaneohe poboy-------just curious (haven't looked at the link yet) .... how did you find it?

I have found vanguard diehards forums very helpful and informative as I have a few dollars invested with vanguard. Same topic with a cut and paste over there as well as here.

[Alan]

Quote:

Originally Posted by poboy I have found vanguard diehards forums very helpful and informative as I have a few dollars invested with vanguard. Same topic with a cut and paste over there as well as here.

Good spot. I followed the link and it looks like Diehards gave the same advice as was given here

[honobob]

Quote:

Originally Posted by Alan Good spot. I followed the link and it looks like Diehards gave the same advice as was given here

Quote from the Diehards..

"A couple of years ago I convinced my friend to diversify out of these things and invest half his portfolio in low fee index funds. He did; his father ignored my advice. So far, I don't look so smart. "

Shoulda stuck with the RDPD forum.

[Alan]

Quote:

Originally Posted by honobob Quote from the Diehards.. "A couple of years ago I convinced my friend to diversify out of these things and invest half his portfolio in low fee index funds. He did; his father ignored my advice. So far, I don't look so smart. " Shoulda stuck with the RDPD forum.

With this type of question, if you ask enough folks you are bound to find folks who will agree and folks who will disagree. This forum and Bogleheads have a majority of members that are risk averse to schemes that are sure bets to beat the market. If you don't want opinions that are different from your own, don't go there.

[Meadbh]

Let me get this straight. The OP is going to make 11% ROI financing private mortgages in a down market in which many financial institutions which should have known better have lost their shirts.

Uh-huh. And I'm a monkey's uncle.

[clifp]

Quote:

Originally Posted by walkinwood AJ290 Welcome to the board & your first post here. You seemed to have already decided this is a good investment, so I don't understand why you are asking this board for our thoughts.

Back in the late 70s, when interest rates were high, inflation was rising, S&L were going bust, credit was tight, and California Real Estate wasn't moving, my parent got involved in one of these low risk things. They sold their house in So Cal for some cash and four pieces of paper; mortgages on various properties. One of the notes paid off early, one paid
regularly at a good interest rate, one paid for several years before defaulting, and the one note given to the parents by the "experience real estate investor" defaulted after less than a year.

I've always been pretty sharp about money, but I was just a college student back then. If I knew then what I knew now, here is what I would have had my parents do.

Act like a banker; run an extensive credit check, ask for explainations of any blemishes. Get three years of tax returns and examine them carefully.

Don't believe any appraiser you didn't hire. In the summer of 2006, my house was appraised by three different professional appraisers The difference between the top and bottom appraisal was $200K/20%. Real Estate prices have declined (slightly) since then so a 70% LTV based on the high valuation would give me little equity.

Finally a few questions for you. How much cash is the experienced real estate investor putting up? What percentage of your net worth are you looking at investing in the private mortgages?

Quote:

If need be, of course. Hell, with a 35 or 50% equity position, I might hope I have to.

Why would you ever hope to foreclose?

[AJ290]

Quote:

Originally Posted by Meadbh Let me get this straight. The OP is going to make 11% ROI financing private mortgages in a down market in which many financial institutions which should have known better have lost their shirts. Uh-huh. And I'm a monkey's ass.

Fixed

[calmloki]

http://www.early-retirement.org/foru...ans-30900.html

Suggest you not get started by being a defensive jerk - but do as you please.

[clifp]

How is the loan working out for you its been about 4 months right?

I also have a question about foreclosures. It is my understanding that for most forclosure the property is put up for public auction. The money recieved is first is use to pay off property taxes, workman liens, legal fees, then 1st , 2nd, 3rd mortgages. Any excess money goes to the property holder.

So using your example of 240K property if they default. The property is auctioned off for say $180K, you get your $120K+ fees and penalities but they get the remaining 40-50K. Is this correct? If so why do you want to foreclose?

[calmloki]

Quote:

Originally Posted by clifp How is the loan working out for you its been about 4 months right? I also have a question about foreclosures. It is my understanding that for most forclosure the property is put up for public auction. The money recieved is first is use to pay off property taxes, workman liens, legal fees, then 1st , 2nd, 3rd mortgages. Any excess money goes to the property holder. So using your example of 240K property if they default. The property is auctioned off for say $180K, you get your $120K+ fees and penalities but they get the remaining 40-50K. Is this correct? If so why do you want to foreclose?

The loans we've made (5-6) have paid every month on time just like clockwork - better than many of our renters! main complaint i've had is that they pay off as quickly as they can get refinanced, so none have gone to their 5 year balloon. Just had a 10 acre w/ mobile in Bend with real nice mountain views pay off at the 18 month mark. Our longest running is a $37k mobile home loan that reset on 7/2006 - it burned down, insurance paid with a check with our name on the check. We ok'd doling the money out to the borrowers as they replaced the old single wide with a much nicer newer double wide - which took the place on the loan of the original mobile. We now have a clause inserted in the contracts that says if the loan pays off inside a year there is a 6 month penalty.
Hope never to have to go through foreclosure, but we are the first mortgage holders. If the loaned on property isn't free and clear then the money we loan is first used to make it so - title company does that before or during closing. Only reason to foreclose is to clear the title and get the property in our name. or get our money. Only been to one courthouse steps property auction, and the bank that held the paper started with an opening bid of what they were owed.

[outtarentals]

[quote=clifp;633314]
I also have a question about foreclosures. It is my understanding that for most forclosure the property is put up for public auction. The money recieved is first is use to pay off property taxes, workman liens, legal fees, then 1st , 2nd, 3rd mortgages. Any excess money goes to the property holder.


Need to check for IRS liens as well. Not sure how easy it is for the defaulter to declare bankrupcy these days and hold things up a bit - I understand not nearly as easily as several years ago.

In the early 80's we bought some discounted second mortgages. Most turned out well with good returns at the time - Total loan to value ratio for us was about 70% on conservative appraisals. One property defaulted - and on this particular property there was also a small 3rd. We foreclosed - and assumed the first. The 3rd note holder lost his equity to the fees and missed payments, and he walked away. It wasn't a good market for selling at the time, so we rented the property and sold it after a few years to the tenant. About broke even on that one.

Recently, I've given some thought to buying a few discounted firsts from seller financed properties - it could work if someone really knows what they're doing and especially if the seller is also carrying a separate second - maybe 15-20% as a cushion. I wouldn't know what return to expect from a borrower with a decent credit rating - would need to do research. These notes may become more common soon with houses so hard to sell. Think I'll pass at this stage though - too much work - slow and steady is just fine.

[tryan]

In MA workman leins are subordinate to the mortgage but condo fees trump the first position. Your state may vary.