Kris Gillmore and Clay Sparkman
Over the past five years we’ve all watched real estate prices come crashing down, in many cases forcing lenders to foreclose and take back the property. Although this is a sad misfortune for some, it is a tremendous opportunity for others. With regard to quick-flip investment property, we have always been of the opinion that the profit is in the purchase, not in the renovation or sale. And now, more than ever, banks are willing to unload their inventory at a discount below market value.
As you know from previous posts, Fairfield Financial is laser focused on doing these types of loans. Here are some guidelines for what we’re looking for and what we’re generally able to fund.
65-70% of the ARV – Depending on the area and the strength of the borrower, 65% LTV is our target (including fees), but for a very strong loan we can often get to 70% LTV. We hold construction funds in an escrow account, which enables us to loan based on the ARV, as opposed to the purchase price.
Loan Size – Right now our sweet spot is in the $150,000 – $250,000 range, although we’ll consider loans from $50,000 – $750,000.
100% Financing – We can finance 100% of the acquisition and rehab costs, assuming that the LTV is appropriate.
Down Payment – We do require that the borrower have some skin in the game for at least the first few loans. Generally speaking, this amount can be as little as 5% down, but the down payment is really determined on a case by case basis, depending on the property and the strength of the borrower.
Secondary collateral – If a down payment isn’t feasible, we can always consider the use of a second property as collateral. This is another way to put some skin in the game.
Term – Typically, these are 12 month deals with no prepayment penalty. Multifamily rental properties can go up to five years, but this too is determined on a case by case basis.
Exit Strategy – As always, this is critical. We’re looking for borrowers with a solid working plan and a clear and likely exit strategy.
Knowledge of local market – This goes hand in hand with the exit strategy. We want to be sure that our borrowers are familiar with the current market trends, and that their plan is consistent with local market activity.
– Clay (clay@privatemoneysource.com, 503-476-2909)
Clay is Vice President of Fairfield Financial, a primary source for private money since 1964. Fairfield is currently targeting loans in OR, WA, AK, CA, CO, ID, FL, GA, ID, MT, NV, NY, OK and TX. To submit a loan to Fairfield for consideration: http://www.privatemoneysource.com/loanproposal.php
Tags: auction buying, construction loans, hard money borrowing, hard money brokering, hard money loans, Multifamily, private money borrowing, private money brokering, private money loans, Quick flip loans, real estate investing, real estate rental, rehab loans, REO funding, Short sales
