Two Loans Closed

My hard money loans numbers 25 and 26 have been paid off. Both of these loans went the full 1 year term. The borrower has paid off the loans, but I'm not sure if it was from selling the properties or from refinancing them to convention mortgages.

Things seem to be slowing down. My partner manages about $6 million in hard money loans and he currently has close to $1 million sitting around waiting to be invested. Our biggest borrower is not borrowing as much as he used to. He thinks people are paying too much for foreclosures these days. Because he specializes in bad neighborhoods, he wants to make sure he doesn't overpay, so he's becoming more selective about the properties he buys. Also, the inventory of foreclosures is starting to shrink a bit.

HML #26 Started

My funds from HML #23 have been rolled into a new loan I am labelling HML #26.

This property is a single family townhouse in Oakland, CA. I think this is the first time I've made a loan on a townhouse. If not, it's certainly one of only a very few. I've got nothing against them. It's just our biggest borrower doesn't buy many of them.

Anyway, this is a 3 bedroom, 2 bath vacant townhouse that is about 1,300 square feet. It has an attached 1 car garage and was built in 2008. It does have a home owners association whose monthly dues are $266. The complex appears to be well maintained and the unit does not appear to need any work on the outside. There is no litigation involving the property filed by the HOA. (Usually when a property with an HOA goes to foreclosure, the HOA has filed some sort of suit against the previous owner for delinquent fees or other issues like property upkeep, yard issues, etc.) The foreclosed-on owner bought the property new in 2008 for $221,000 with only a $8,000 down payment.

The neighborhood was built by the city of Oakland as a housing project, so it's not the best area. There were income and occupancy restrictions when the place was built, but my partner spoke with a neighbor and she wasn't sure if those were still in place. However, we think they are since the agent mentioned this in the expired MLS listing.

There are few comps in the complex. There are only two other properties listed in the MLS for this complex. Both are true comps, in that they are similar is square footage and features. One sold a month ago for $135,000 and the other has been on the market since August with a listing price of $128,000. The income and occupancy limits also place restrictions on how much people can sell the properties for, so the prices in this complex are kept artificially low. If you look for comps on Zillow or Foreclosure Radar, they give values much higher as they don't take this into account.

We're are conservatively figuring this is worth $110,000 as-is or $120,000 after repair. Our borrower bought it at auction for $108,000. There were no other bidders. (I'm guess they were scared off by the fact that this is in a housing project.) Our loan amount is for $73,500, giving us a 68% LTV using the purchase price, a 67% LTV ratio using the as-is price, and a 61% LTV using the after repair price. The borrower is our best customer and is personally guaranteeing the loan. The loan is our standard: 12% interest only payments, 1 year term.

It's going to be interesting to see how long this takes to sell.