Clay Sparkman
I’m not sure how many of you have made loans with us before, so I thought I would post a prospectus for a loan that we are currently in the process of placing. The prospectus which is shown here is the high level presentation, or executive summary of the loan. Having read the prospectus you should have a pretty good idea what the loan/borrower/project is all about and what this loan looks like as a potential investment.
When an investor wishes to fully evaluate a loan investment, we send a full package in Adobe Acrobat format (generally between 50 and 200 pages) password protected, and with backup documentation to support and inform the investor in detail regarding the known relevant particulars of the proposed loan.
If you are interested in discussing private money loans in general or this one in particular, you may contact me at sparkman@lendicom.com or Kris Gillmore, who is coordinating this loan, at 503-319-7294, or gillmore@privatemoneysource.com.
Kris Gillmore
Fairfield Financial Services, Inc
2727 NW Hoyt St, Portland, OR 97232
Phone 503-319-7294, e-mail: gillmore@privatemoneysource.com
REAL ESTATE PROSPECTUS
SECURED LOAN
Construction funds for a single-family home in Portland, Oregon.
Loan Details
- Loan Amount: $355,000
- Term: 1 year
- Interest Rate: 13%
- Monthly Payment: $3,845.83
- Construction Holdback Account: $157,000
- Interest Reserve: $11,574 (The borrower will make ½ the monthly payment out of pocket effectively making this a 6 month partial reserve)
- Security: Deed of Trust in 1st Position security interest in real property located in Portland, Oregon
- Combined As-Is Value by Borrower / Realtor estimate: $282,000
- Combined Front End LTV: 70%
- Combined Projected Value by Borrower / Realtor estimate: $525,000
- Combined Projected LTV: 67%
Loan Overview
The proceeds of this loan will be used to pay off an existing hard money loan. The construction funds will be used to build a single-family residence with a full daylight basement that can be rented as a separate apartment.
The borrowers acquired these two lots in 2006. Additionally, they also acquired the property behind these lots with a house in need of repair. They rehabbed the house, which is now held as a rental, and put in a road to access lots 2 and 3. After the acquisition of this property, the borrowers invested approximately $42,000 out of pocket into the lot development. They report that this figure does not include their time and labor. The two parcels being used as collateral have been fully developed and are prepped for vertical construction. Once construction on lot 3 has been completed and sold, the borrowers intend to build another spec home on lot 2. The borrower’s have carefully planned the development and construction of these three lots, and they’ve been successful in their execution of this plan so far. The borrowers are not bringing in any cash to close this loan, but they do have approximately $100,000 in equity that they are pledging as collateral.
The borrowers plan to exit this loan with the sale of the property. They believe that the basement apartment and view will make the property more attractive than other properties currently listed in this area. As a contingency, if the property does not sell, the borrower intends to rent both units and seek a conventional mortgage. Total income is projected at $2,250 per month if both units are rented.
Property
The property consists of two similar lots (lot 2 and lot 3), although construction will only occur initially on lot 3. Lot 3 is 4,750sf, with sewer, water, power, phone, and cable on site. This property has a partial view looking south east towards Milwaukie. Photos of the lots have been provided
The proposed single family residence will be 2,680sf, with 4 bedrooms and 3.5 baths. There will be a two car garage, and two fireplaces. This home will also have central air, granite countertops, stainless steel appliances, and will include a finished live-in basement that can be rented as a separate unit. Half of the basement walls will be exposed with windows, and will be more like a first floor than a traditional basement.
Valuation
As-Is Value
Based on recent comps provided by the borrowers, they estimate the value of lot 2 to be $132,000. Lot 3 is approx. 2000sf smaller, and by the same comps the borrower estimates a bare land value of $115,000. Considering the amount of work that has been done (excavation, footing, 6 months of engineering with the city, plans) the borrowers estimate a value of approximately $150,000. This is a combined estimated value of $282,000.
Projected Value
Recent comps were provided by the borrower. Based on these comps, the borrower and his realtor have decided to list the property for $410,000. A property inspection was performed by our VP, who reports that $410,000 seems like a reasonably conservative estimate of value.
When combined with lot 2 as cross collateral, the combined projected value of this property is $525,000
Financial Status
Fairfield was provided with a signed 1003 for xxxx and yyyy. They state a combined gross income of $12,300 per month (this is an average amount based on xxxx’s variable construction income) and a net worth of $208,595. A copy is provided for your review.
Credit
xxxx has a mid-credit score of 528, while yyyy has a mid-credit score of 527. xxxx’s income is variable, and he is currently having some cash flow issues. xxxx reports that he is expecting payment from a large project, and has another lined up. It should be noted that the borrowers have a perfect pay history with Fairfield over the past 2 years.
Experience
xxxx reports that he has 40 years of construction experience. A resume of his work over the past 15 years is provided for your review.
<end of private money loan prospectus>
— Clay (sparkman@lendicom.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.
Tags: hard money investing, hard money lending, hard money loans, investing, Oregon, private money investing, private money lending, private money loans, real estate investing, trust deed investing, trust deed lending, trust deed loans
