Fairfield Financial Services, Inc. - Private Money Loans, Lending & Borrowing

There’s something about equity

Clay Sparkman

With a double dip real estate depreciation nationwide becoming fact in April, and now with  the federal government threatening not to extend government backed financing options large (jumbo) residential loans, this market is hardly getting easier or more predictable.  So you might ask, “How do we get private money loans done in today’s real estate market?”

Well I can tell you this.  Equity comes at a premium.  A particular loan scenario may have certain flaws, but if the equity position is strong enough, we can generally place that investment with our investors and they will feel comfortable knowing that if they have to take the property back, they will be unlikely to lose principal or interest given the enormous amount of buffer involved.  And even better, if there is a large amount of equity it is very unlikely that the properties would ever come back at auction.  First of all, the borrower has a great deal at stake and thus is very likely to make loan payment a priority.  And secondly, even if the borrower gets into trouble, there is almost always one more loan or one more rescue option to come in and take you out the existing investment.

Here are a couple of examples, loans that we are currently packaging for placement.

Sample 1 – $200,000 loan on a Washington non-OO home which is free and clear.  The home is valued at $375,000 and the loan proceeds will be used to pay accumulated business taxes.

Sample 2 – $60,000 loan on an Oregon coast OO residential foreclosure bailout.  The home recently appraised at $162,500.

So you see the common theme: trouble coupled with large equity positions = good private money loan investment.  We’re seeing more and more of this kind of thing.

So remember the private money investor’s credo:  Never lend on a property that  you wouldn’t buy for the price of the loan AND any property that you would gladly buy for the price of the loan is a loan worth serious consideration.

— Clay (clay@privatemoneysource.com, 503-476-2909 or 800-971-1858)

Clay is Vice President of Fairfield Financial, a primary source for private money loans since 1964.  Fairfield works with a broad range of private money investors, in a broker capacity, finding, underwriting, presenting, closing, servicing, and when necessary, assisting in the workout of difficult loans.

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