Clay Sparkman
We’ve had a lot of nice solid little loans come in lately. (As you know, we have a tradition of, from time to time, presenting one of the loans that we have placed or are in the process of placing, so that blog readers can see (a) the types of loans that we are placing, (b) how we feel that loans should be presented, and (c) be presented with potential investment opportunities.) Keep in mind that this is only the summary. If an investor expresses interest in reviewing the details of a loan, we put the prospectus on top of all of the relevant documentation and send it via e-mail in an Adobe file.
This particular loan is live and we are in the process of placing it as a fractional loan, so if you are an accredited investor looking to put a relatively small amount into a fractional loan at this time, please let us know.
Kristopher Gillmore
Fairfield Financial Services, Inc
3327 SE 50th St, Portland, OR 97006
Phone (503) 319-7294 / Fax (503) 419-4219 / E-mail: gillmore@privatemoneysource.com
REAL ESTATE PROSPECTUS
SECURED LOAN
Refi and construction of SFR Ridgefield, WA, with additional industrial zoned land as cross collateral.
Loan Details
- Loan Amount: $262,000
- Term: 24 Months
- Interest Rate: 12%
- Monthly Payments: $2,620 Interest Only
- Security: Deed of Trust in 1st Position security interest in real property at XXX, WA
- Construction Holdback: $98,903
- Cash out to pay extension fee on existing land loan: $13,000
- Projected Value by lowest $/SF on BPO: $416,926
- Projected LTV based on BPO: 63%
- Additional Collateral security: Deed of Trust in 3rd Position in real property at YYY, WA
11. As-Is Value of Additional Collateral based on BPO: $550,000
- Current liens on Additional Collateral: approx. $300,000
NOTE – the Additional Collateral does strengthen the loan as there is additional security, but has not been used in any LTV calculations.
Loan Overview
XXX currently owns the subject property held by his company, YYY, LLC. This property is over 100 years old, and has been in XXX’s family the entire time. After falling on hard times and losing the property in a foreclosure in 2011, XXX re-acquired this property in February of 2012 with a purchase loan through Fairfield. The purchase price was $170,000 and after closing costs and all other fees, XXX made a down payment of approximately $74,000 to purchase the property. The principal balance of the loan is currently $125,000
Currently, XXX is requesting funds to refi the existing loan and an additional $99,000 to be held in a construction holdback account for the expansion and updates to the house. The construction funds will be used to add 1,300 square feet of living space, a new upstairs bathroom, grandmother’s quarters, full wrap around porch, and 2 a car garage. A line item budget has been provided for the proposed work.
In addition, he is also requesting $13,000 to be used to pay the extension fees on an existing land loan for a property that XXX owns with his father. The land has a current 1st of $150,000, as well as an IRS lien for $150,000. It has been reported that the IRS lien is inaccurate, and will be reduced to somewhere in the range of $8,000 to $20,000. A representative of the IRS has signed a statement from the borrower saying that this is accurate (the IRS representative was unable to write the letter herself – but agreed to sign it if it was prepared by the borrower and accurate). Ultimately, the combined 1st and 2nd on this land should be no more than $170,000. To strengthen the loan (and to compensate for the cash out), this property can be used as additional cross collateral for the loan, and is valued by a BPO at $550,000.
XXX’s pay history for the past 18 months has been solid, (with the exception of a payment in January 2013 that was 2 days late, and his most recent payment, which was late because XXX thought he’d be able to refinance the loan before that payment was due). The loan is currently in good standing.
As the property has been in XXX’s family for over 100 years, he intends to keep it that way and plans exit the loan with a conventional refinance. He is currently holding this property as an investment property under his company, YYY, and will continue to do so.
Property
Primary Collateral
Currently, the property is 1,580 square feet, with 3 bedrooms and 1 bathroom. It sits on a level 4.6 acre lot with several outbuildings and was built in 1901. He plans to expand the house to 2,880 square feet with an additional bathroom, grandmother’s quarters, full wrap around porch, and 2 a car garage. A line item budget is provided in the packet, and plans can be provided upon request.
Cross Collateral
The secondary collateral is two unimproved 5 acre lots with Commercial zoning, located just south of the core “XXX” Industrial warehouse district, and just north of the commercial district near the YYY County Fairgrounds. Utilities, including city sewer, water, and electricity are available at the road. Currently, the lots are owned by XXX and his father, ZZZ. XXX will eventually be buying his father out, and plans to do so with a long term refi after the IRS liens get sorted out. A BPO with photos of the property is provided in the packet.
Valuation
Primary Collateral Projected Value – A BPO has been provided by a local realtor. Using 3 sold comps and 3 active listings; he estimates a value of $500,000, subject to the completion of the proposed construction. This BPO is provided in the full packet for your review.
NOTE: The realtor does report that there are not a lot of comps available for homes of this age, as not many of them remain, and that there is a wide range of values. (However, keep in mind that the effective age of the property will be significantly less and more in line with current values) The Lowest $/SF of the sold comps provided is $146.80/SF, while the lowest $/SF of the active listings provided is $149.47/SF. Using the projected square footage of the subject property times the lowest $/SF of all the sold/active comps would yield a value of $416,926. For the purposes of this report, this more conservative number is used in the LTV calculation.
A formal appraisal has been ordered to give additional support to the valuation. This will be available for review as soon as we receive the report.
Cross Collateral
The same realtor has provided another BPO with 3 sold comps and 3 listings for this property as well. He reports that there are very limited sold comps, and the most weight is given to a listing with a very similar property within one mile from the subject. Note – this listing has been on the market for 2 years at $550,000, so a sale price at $550,000 for the Cross collateral seems optimistic. This BPO has been provided for your review.
Income
XXX owns his own trucking company, which reported a gross income of $414,000 in 2012. Bank statements have been provided to verify this income. A P&L has been provided, and his net income is reported to be $65,940. It should be noted that his company is currently paying all of his personal expenses (house payment, cell phone, food, land loan interest payments, etc…). With these personal expenses being considered income, that would yield a net personal income of approximately $94,000
Credit
XXX has a mid-credit score of 662. He went through some financial troubles about 3 years ago, but since has cleaned up his credit, and is current on all his accounts. Currently, he only has 3 balances being reported.
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– 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.
Tags: hard money investing, hard money loans, loan underwriting, private money investing, private money loans, trust deed investing, trust deed lending, trust deed loans, Washington
