HML #29 Started

My partner found another deal to loan on and my funds from HML #25 and #26 are being used to help fund this one.

This property is a nicer one than I normally lend on, although after looking at the photos below, you may think otherwise. The biggest difference is this property is in a fairly nice location and is surrounded by homes in the $1 million and higher range in the city of Orinda, California. Our borrower also is buying this house through a Realtor, rather than at an auction, where most of the properties we lend on normally are purchased. The buyer is also paying an assignment fee, meaning she found this property with the help of a bird dog.

The property is a single family home (2/1) with an attached two car garage. It was built in 1951 and is about 1400 square feet. Here are some pictures:

The interior looks like it still has the original fixtures, tile, etc. It will need extensive remodeling to bring it up to the standard of the neighboring houses. (Those were also built in the 1950's, but interior photos of comps on the MLS show completely re-done and very modern looking interiors.)  Externally, there are several issues - termite tubes have been found in the crawlspace under the house, there are some cracks seen in the foundation, and there are some drainage issues with the slope of the landscaping. The buyer had a professional property inspection performed, which I have a copy of. Besides the previously mentioned issues, an electrician will likely need to be brought in to re-wire pretty much the whole house. There are no GFCI circuits (they didn't exist when the house was built), the breaker box is a 50 amp circuit and not the standard 100 amp used today, and there were several places where the ground circuit was either non-existent or poorly wired. The roof appears to be OK, although it needs to be cleared of some debris. Rain gutters need to be removed or re-hung. There is a porch that is practically falling down that will probably also have to be removed. Based on the inspector's report, I would estimate between $50,000 and $75,000 in repairs are needed. But that's based on Arizona costs. I don't know what they would run in California.

The buyer is purchasing the house for $520,000 plus a bird dog fee. We estimate the current as-is value to be $600,000. Our loan will be for $460,000. Based on comps, we estimate the after repaired value to be at least $825,000. Given the good neighborhood (three comps describe the neighborhood as "coveted", "premier", and "desirable" - all written by different agents at different agencies) and the large amount of equity, my partner rates this as one of the top 10 safest deals he has done, out of close to 200 total. The borrower is our second largest borrower and the loan will be personally guaranteed. She has always paid promptly in the past and has been rehabbing property for at least 5 years (although we've only worked with her for 2 years). The drawbacks: this is the smallest property of the comps we looked at, so the comps may not be truly representative of the property's value. However, they are all we have to go on. The other big drawback, of course, is the condition of the property. It needs a lot of work. If we have to take this one back from the borrower, we will have some serious work to do if we want to fix and sell.