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Friday, January 29, 2010

Hard Money Loan #11

My partner finally found another property to invest my principle from hard money loan #9, which was paid off a little over a month ago. Hard money loan #11 is on a property picked up for one cent over opening bid at a foreclosure auction in San Ramon, California. I normally don't post photos of the properties I am lending on here, but this one is just beautiful, so I have to. For a foreclosure, this is in excellent shape.




This was a rental property and my partner spoke with the owner (who was being foreclosed on). He said he has two tenants living in the property who are paying him $1,600 a month in rent. The lender sent the tenants a letter stating they can live in the property for up to 60 days after the sale. Not sure what authority they have to make that promise since after the sale, it is no longer the lender's property and they should have no say in what is done with it. But anyway, when my partner was there, the tenants were loading a U-Haul, so they don't seem to be planning on staying.

The house was purchased at auction for $577,000 cash and the first mortgage I am a part of will be for $400,000. This gives a LTV of 69% based on the purchase price. The property was purchased in 2004 for $860,000. Current estimate of worth is between $650,000 and $700,000. Buyer is my partner's wife, who has a credit score in the 800s. The interest rate is 9%, which is one percent less than what I normally get. I consider it an employee discount :-) Mortgage is for one year, but we expect it to be paid off in 6 months.

6 comments:

Bob Stahl said...

Congrats. I don't know about you, but in the Phoenix metro area I'm seeing a rise in higher-end homes going in to foreclosure -- great investment opportunities.

Real Estate Monkey said...

Great Job. I have too made money lending to others on their rehabs. Do you only lend on N/O/O homes? I only loan to investors who I know are going to flip it out and therefore get my money back in a short period of time. I am considering a long term (36 month) loan to an O/O home. Thoughts?

Shaun said...

I typically only make loans to people flipping or rehabbing. My standard term is 1 year, interest only payments. I tend to stay away from O/O (owner occupied) loans simply because they tend to be longer term and usually are a little more complicated from a bookkeeping perspective. If the loan is being amortized, it's a little more involved keeping track of balances. A longer term loan also means you need to know a little more about the borrowers. My loans are made almost entirely based on the condition and value (or potential value) of a property.

SCN said...

Shaun,

What do i need to do to get qualified for a HML from you? I live in Baton Rouge.

Stephen Norton

Shaun said...

I don't know that area or know anyone who works in that area, so I wouldn't lend there. But for most HMLs, the buyer typically doesn't have to do anything to get qualified - the loan depends solely on the value of the property. (Well, and to some extent, what the borrower is going to do with it.) Typically, hard money lenders will only loan up to 70%-75% of the value of the property (or after repaired value, if the house is a rehab project).

ch ch said...

wow, what a beautiful house! 577K? Man, I think I gonna move to CA. For that price I can only get a attached townhouse here in Queens NY.

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