MOM AND DAD LENDING

Need money to buy a house? We might be able to help.

Need money to buy a car or Rolex? No can do.

We are not a bank, just a retired couple in Tempe. We do not have on-line forms to fill out. To get more info you can call me but only after you’ve read and re-read all of this. I have tried to explain borrowing as simply as possible.

COMMON QUESTIONS

Q. How are you different from a bank?

A. Banks want your tax returns. We don’t. Banks take forever. We’re

quick.

Q. Who do you lend to?

A. People who are buying a home to rent or flip.

Q. How do I qualify?

A. You need collateral but it must be a house not a car or jewelry.

Q. What’s collateral?

A. It’s the house you own or are buying. If we lend you money and you

don’t pay us we will foreclose and you will lose the house. Just like a bank

our position is secured by a Deed of Trust. You will own the property, but

it is also acting as collateral if you don’t make your payments. The ele-

phant in the room is equity.

Q. What is equity?

A. Say your home is worth $400k and you owe the mortgage company

$300k. Your equity is $100k. It’s the money you would make if you sold

it (ignoring tax issues). The secret sauce to Fix and Flip is finding a good

deal. Let’s say you find a house that’s worth $400k but, because you’re

charming or the seller is your Mom, you can buy it for $300k. You just

walked into $100k of equity.

Q. What’s the first step?

A. Figure out what the house is worth. A purchase amount or appraisal

is best but otherwise go to Zillow and Realtor.com and take the lower

amount.

Q. How much do you charge?

A. It changes but right now about 12% to 14% per year, interest only.

According to Nerd Wallet the average current interest for personal loans

from a bank for people with good credit (690-719) is 14.12%.

Q. What? I can get a 30 year mortgage @ 7%.

A. Yes, but it takes a long time so that’s where hard money (that’s us)

comes in. As a bridge of say 3 to 6 months to be sure you get the proper-

ty now then refinance or sell later.

Q. Will you accept a second collateral position?

A. No.

Q. What is a second position?

A. Also called a second lien it is a debt that has a lower priority claim than

a first position lien debt. If something goes wrong the first lien collects

first and there is often not enough left to pay the second position. Sounds

complicated but it matters to you because if, for instance, you owe $200k

on a $400k house and want to borrow $80k you will actually have to bor-

row $280k so that our money takes out the bank that is in first position

but if your original mortgage interest rate is low, say 3%, then your pay-

ments will jump from $800/month to $1,500/month. Interest rates rule

the world…

THINGS TO KEEP IN MIND

  1. We will only give you about 70% of the value of the property so you need a chunk of savings to do a deal.

  2. Metro Phoenix only.

  3. We will not base the value of the property on your intention to renovate or, as Bigger Pockets would say, “the ARV” or After Repair Value.

  4. We are lenders only as opposed to partners with equity in the deal.

Give me a call if you like, after you re-read these questions and answers.
This is my cell phone. I’m up early weekdays but after 2:30 pm and on weekends please text.

Thanks,

William Napoleon
602.725.7009