Most Common Scenarios

Summary

Shad Long, Chief Investment Office with Verdeo Capital, a Sacramento area private money lender explains the three most commonly seen situations that come through their office.

  1. Shortsale, Foreclosure, or Bankruptcy
  2. Hard to Prove Income or Self Employed?
  3. Non Owner Occupied Real Estate Investors.

You are not immediately disqualified for a private money loan if you have a shortsale, foreclosure, bankruptcy, hard to prove income, are self employed or if you are a real estate investor with multiple properties.

Shad discusses the nuances of each of these situations and why you are likely qualified for a private mortgage.

Call Verdeo Capital today at (916) 580-1240 to review your unique situation.


What is Private Lending?

Most Common Scenarios

Qualification Process

Borrowing Process


00:01 Gregory Glacken: Hello and welcome. I’m here today with Shad Long of Verdeo Capital Group, private money lender here in the Greater Bay Area of California. Premiere private lender in Northern California, servicing the area here. And, Shad, we were talking recently about the different scenarios that come through your office. And as Chief Investment Officer of the organization, you see it all. So you see everybody and their scenarios coming through. So why don’t you tell us a little about what those scenarios look like and maybe some examples of some fundings and what you get on a daily basis.

00:33 Shad Long: Sure. Yeah, I think we’d probably, over the years, seen just about everything. Probably a few of the more common scenarios that we’ve seen over the last 12 to 18 months and probably for the more foreseeable future, as well. One would be folks that have a recent or looming short sale or foreclosure. These are folks that really on the shelf from bank financing for the next two to three-year period of time. We’re happy to help these folks out as long as they’re able to comply with some of the underwriting guidelines and restrictions that we have, but most commonly, they need to be able to have at least a 35% down payment in looking to purchase an investment property. So what we would do is we would structure a term for these folks that coincides with their ability to go in and rewrite out of our note. So we’ll structure a term somewhere in the range of a two to three-year clip of time. Again, affording them the flexibility to go ahead and rewrite out of that note.

01:41 Shad Long: Another very common scenario are folks that are self-employed. These folks, through the years, have been taught to write off as much of their income on their tax purposes as possible for obvious reasons. Well, these folks are faced with a great challenge right now. What does not show up on the bottom line of your tax returns, you can’t use. Conventionally speaking, you can’t use for underwriting purposes for qualifying for bank loan.

02:09 Gregory Glacken: Sure. That would be on the profit and loss, but of course, it’s not gonna be in the tax statement.

02:13 Shad Long: Right, right. Similar situation with the folks with the short sale or foreclosure, we’ll structure a term for these folks that allow them and afford them the flexibility of time to go in and readjust or restructure the way they file their taxes. So we’ll write a term for a two, three, four-year clip of time, and again, affording them the flexibility of the time to go in and restructure the way they’re filing their taxes. Now we can verify their income other ways. We still have to verify their income. I mean, we can’t set someone to fail. They still have to be able to document that they can afford these payments. But we can verify their income via… As an example, via bank statements. The bank statements are gonna show us their actual deposits and we can utilize that.

03:01 Gregory Glacken: Okay.

03:02 Shad Long: Another common scenario are borrowers that come to us looking to purchase a property that is not finance-able by bank standards. Just to give you an example, maybe they’re buying a property that is banked owned, it was foreclosed on. Previous owners took the kitchen, took the bathroom with them, maybe they took the air-conditioning unit with them. These properties, they’re not finance-able, traditionally speaking. Well, we’re fine with that. We’ll go in, we’ll structure a term, whether it’s a short term, whether they’re looking to fix it up and flip it, or whether they’re looking to fix it up and hang on to it and put a renter in it, hang on to it as an investment. Whatever it may be, we will lend up to 65%, in most cases, of the purchase price. Plus we’ll even take it a step further and we’ll lend up to 65% of the rehab or construction cost, as well.

03:59 Gregory Glacken: Okay, okay.

04:01 Shad Long: We’ll write a term that, again, coincides with their exit strategy. If they’re looking to just fix it up and flip it, we may write a one-year term. If they’re looking to fix it up, hang on to it, put a new note on it, we may write a two or three-year term for these folks.

04:19 Gregory Glacken: Okay. So it sounds like there’s actually two events that are taking place here with regard to the rehab situation here where people come in and you can write a note upto 65% of the purchase. Then, again, there’s a second event that takes place of the value of the property after it’s completed, is that right?

04:42 Shad Long: It is. It all takes place at one time within one event, but you can kind of break it down that way. And typically, what we’ll do is we won’t necessarily take the after-repair value, we’ll take the total hard cost.

04:55 Gregory Glacken: I understand.

04:56 Shad Long: So just to use round numbers, if someone’s purchasing a property for a $100,000 it needs $40,000 worth of work, we’ll lend possibly up to 65% of 140,000 which would be the total.

05:09 Gregory Glacken: Okay. Okay, very good. So just to recap, we’ve got folks come through your office who are hit with the economic condition of what’s going on here, in the world right now with short sale and perhaps a bankruptcy foreclosure, that was one option. The second was for those who come through and hard to qualify their income. And the third was really focused around the investor who’s interested in flipping homes or putting renters in those homes, non-owner occupied is what I’m hearing from you, is that right?

05:39 Shad Long: It is.

05:40 Gregory Glacken: Okay.

05:40 Shad Long: It is, yeah and again, these are probably three of the more common scenarios that we see. These three combined probably make up a big majority of our business right now, but as we previously mentioned, we see just about everything.

05:54 Gregory Glacken: Alright. Okay. Alright, very good. Sounds like you have the latitude to really hear a variety of situations and make decisions on the fly.

06:02 Shad Long: Right, true.

06:03 Gregory Glacken: Okay, alright very good. Well, folks listen, thanks so much for watching today. Shad Long, Chief Investment Officer with Verdeo Capital Group and if you’ve got questions from specifically around your situation or maybe if this might be the right fit for you, maybe it is, maybe it’s not, who’s to say? A five-minute conversation will give you that answer. So, give Shad Long a call, 916-580-1240 or visit him on the web over at verdeocapital.com. Thanks so much.