Clay Sparkman
Here is a prospectus for a loan that we placed in 2019. This is fairly typical of the types of loans that we do. We provide samples of our work several times per year. Not only does it give borrowers and brokers a better idea of the kinds of things that we do, but it also gives them a nice working format for presenting new loans.
REAL ESTATE PROSPECTUS
SECURED LOAN
Cash out refi on SFR rental property in Lake Oswego, OR
Loan Details
- Loan Amount: $380,000
- Term: 24 Months
- Interest Rate: 9%
- Monthly Payments: $2,850 Interest Only
- Security: Deed of Trust in 1st Position security interest in real property at XXXXXXXXXXXX, Lake Oswego, OR
- Clackamas County Assessor Market Value $1,768,046
- LTV based on Assessor Value: 21%
Loan Overview
Mr. and Mrs. XXXXXXXXX purchased this property with all cash in 2014 for 1,450,000 in April of 2014. Mr. XXXXXXXXX is an Attorney in CA, who was specializing in construction liability law. Shortly after purchasing this house, there were changes to the regulations in CA that essentially destroyed his business. This caused a cash flow shortage (and a hit to their credit), and he then borrowed $264,000 against this house through Fairfield. His loan is ballooning in a few months, and rather than pay it off, he’d like to pull out some more cash to take advantage of an investment opportunity. His current workload is such that another private loan through Fairfield (vs. a more conventional loan) is attractive because he simply doesn’t have time to shop around or go through the process with a bank.
The property is being used as a short-term rental, marketed to people moving to the area while they look for permanent housing. The borrower reports that a typical rental time is 2-6 months. Currently, they are between tenants.
The borrower plans to exit this loan with a refinance or to simply pay it off with cash out of pocket in the next 2 years.
Property and Valuation
The property is .6 acres with 7,569 SF home that includes 4 bedrooms, 3.5 baths, finished basement, attached 2 stall garage, detached 3 stall garage (that the borrowers intend to convert into a separate living space), climate controlled wine cellar, vaulted ceilings, sun room, and high end finishes.
I visited the property when we made the loan in 2017, and although the furnishings are different, the photos are a good representation of the house. This is a very nice property in a high-end location in Lake Oswego. The land value alone is estimated by the county assessor as $423,646. Zillow.com estimates this property to be worth just under 1.7MM, and Realtor.com estimates a value of $1,832,400. I have no concerns with the value of this property as being more than sufficient to collateralize this loan with very little risk.
Income
A commercial loan application has been provided by the borrower’s showing an annual income of approximately $360,000. Property taxes are not included in this loan, or their current loan, and the borrower has kept them current. In addition, I’ve included a copy of their pay history in the loan packet. Mr. XXXXXXXXX’s bookkeeper makes the payments each month, and the pay history is excellent. The June 2019 payment was late, but that was an oversight by the bookkeeper. When I let Mr. XXXXXXXXX know, they sent a check out immediately.
Credit and Prelim
A credit report for Mr. and Mrs. XXXXXXXXX have been provided in the packet. As I briefly mentioned above, the demise of Mr. XXXXXXXXX’s practice a few years ago had a big impact on their credit. At the time of the loan in 2017, their credit scores were in the upper 500’s. currently, their scores are in the mid-600’s, each with a mid-score of 643. There are some charge-offs on the report, and one account still in collection left over from his business, but all other accounts are current. I believe this is an excellent sign, and it has also put them in a position to where they could qualify (or at least meet a min. credit score requirement) for a more traditional
Tags: broker referrals, Commercial loans, construction loans, finding lenders, hard money borrowing, hard money brokering, hard money loans, Multifamily, Oregon, private money borrowing, private money brokering, private money investing, private money loans, Quick flip loans, real estate investing, real estate rental
