Tuesday, August 13, 2013

Hard Money Loan #28 Started

The funds from my last loan that closed have been reinvested. This one is a single family home in San Pablo, CA. It's not in the best neighborhood, but the house itself isn't too bad.

The house was bought at auction for $151,000. Our loan is for $94,500, giving us a 62% loan to value ratio. The buyer plans to put $20,000 in remodel work into the property. We estimate the after repair value to be $190,000.

The property is a 1,050 square foot single family home, 4 bedroom, 2 bath. It was built in 1954 and has a single car garage. It sits on a 5,800 square foot lot. Behind the house is a raised train track and beyond that is the San Pablo Bay. Comps sold for between $160,000 and $170,000 within the past year. The $160,000 comp sold in one day and the $170,000 one sold in less than 1 month. There was only one other home recently for sale and it also sold very quickly. As a result, our borrower is going to try to get top dollar and will list it for $225,000.

The pros of this deal are:
  1. It's a short duration. The rehab is mostly done.
  2. There were multiple bids at auction for this property, meaing other investors thought it was a good deal.
  3. The area is a seller's market right now.
  4. The LTV is 62% - much better than our normal 75%.
The cons:
  1. Elevated train track behind the house. Could be very loud, but the borrower says inside it isn't bad.
  2. Not the best neighborhood.

This loan is going to be a very short duration. The borrower did not ask for a loan until about 1.5 months after he purchased the property. (He needs funds now to move on to another property.) The rehab work has now been completed and the property should be listed in about 7 days. The borrower put in a new water heater, carpet, and garage door, along with other miscellaneous items.

The borrower works with our biggest borrower and has had about 7 loans with my partner in the past. He's paid all of them on time.


Another Investor said...

Yep, that's a fine neighborhood. Let's hope it sells before it is stripped or worse.

Actually, it had a bit of charm back in the 1950's and 60's. Always working class, but low cost and near the water. Some of these areas were eclectic mixes back then.

Joe & Ali's Europe Blog said...

Hey Shaun,
Been reading for a few years. About to do my first HML (as the lender) to an investor I met at a local REIA. Would love if you'd do a post with a copy of the promissory note and deed of trust you use (with the personal information/addresses changed to 123 Main Street and John Doe, or whatever). Would like to have one to look over and present to my lawyer for review (rather than having them do one from scratch).

Or if you could email me a copy, if you don't think that's worthy of a post, I'd really appreciate it!

(No "contact" link on blog, so just leaving this as a comment on the latest post.. hope you see it.)

Shaun said...

I don't think that would be a good idea. Laws vary wildly from state to state, possibly even county by county. Your best bet would be to go to an office supply store. They usually have blank forms for the state you are in. Alternately, there are several sites online that will sell you documents for your state. You can always get one of those and send it to a lawyer for review. It's mostly boilerplate stuff, but you have to make sure you have the boilerplate specific to your state.

I don't use a promissory note - just a trust deed. But some states uses a mortgage document instead of trust deeds. Just be sure to go through an escrow company and get it publicly recorded so your investment is protected.

Joe & Ali's Europe Blog said...

Got it. Thanks for the advice!

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