Our clients
are a typical hardworking couple. They own a company together that imports
popular children’s music boxes from China. 
They have struggled to keep ahead of an increasingly debt ridden
situation due to the economy and poor real estate values.

Two years
ago they used her IRA to purchase a 10 unit apartment building in Stockton for
$400,000. They paid all cash with the IRA. This same building sold for $800,000
in 2002. They saw this as an excellent investment with the potential to produce
$6,000 per month income – a decent retirement income. However, they weren’t
making enough money to maintain the building which had fallen into disrepair and
their bills were getting the better of them. They needed to tap into the equity
in this property to save their business and another property they owned that
was close to foreclosure.

In order to
borrow against this property, they required a non-recourse loan since the
wife’s IRA bought the property.  Unfortunately, this property was not in the
kind of condition to obtain a non-recourse loan from one of the traditional
lenders for this loan type. Of the 10 units, only 4 were occupied and 1 of
those was being used to employ a property manager so only 3 of them were paying
rent.  The only way we could get a
non-recourse loan would be through a private ‘hard money’ loan company.

Lending Resources Group
(LRG) has several sources for private hard money.  Let’s just say that over a period of more
than 2 months, we presented this transaction to 3 hard money lenders.  The first lender rejected it due to a lack of
interested investors for the Stockton, CA location. The second lender rejected
it after their 1 interested investor decided not to go forward.  The first lender that we had approached
resurfaced with another possible investor. Interestingly enough, that investor
was the CEO of his own commercial real estate company. He was considering
lending 50% of the appraised value ($225,000). 
He visited the property and communicated he was prepared to move forward
with the

transaction
providing he could meet with the borrower to discuss what he felt needed to be
done with the property to put it in a better position to produce income.  LRG arranged an appointment through the
lender for their client to meet with the owner of the building. One day after
the appointment was set, the hard money lender received an email from their
client listing all the reasons why he chose not to pursue this investment. He
listed all 9 reasons why he didn’t want to lend the money our client was
seeking. These were all previously discussed factors that had been known to all
parties for at least 2 weeks.  The hard
money broker forwarded his email to LRG and said the deal was off. This was, to
say the least, very disconcerting as a lot of work and time had been put into
this. Further, expectations had been set with the borrower who desperately
needed these funds or else major losses would be incurred both personally and
businesswise.

The Owner of
that hard money lending company was very apologetic. He referred LRG to another
hard money source in San Francisco that was known to facilitate difficult deals
such as this one. In this particular case, not only was there only 3 rental
units out of 10 producing cash flow, but there were a few structural and health
violations against it by the city of Stockton. In addition, this 3^rd
hard money source had never done a non-recourse loan to an IRA before. There
were a number of hurdles to jump, but the lender was very accommodating and
wanted the business.

Keeping in
mind that the pursuit of this loan took nearly 3 months from start to finish,
this hard money lender took only 7 business days from start to finish to fund
this loan.  This, in turn, provided the
borrower with the much needed $120,000 they required to keep their business in
good stead and bail another property they owned out of foreclosure. 

This was a
very satisfying transaction to have closed, because of the degree of difficulty
it presented and the fact that it had been turned down by 3 other investors
from the 2 prior hard money lenders.  Persistence
paid off for all parties involved. The borrower and her husband are good
clients of Lending Resources Group.