Clay Sparkman
Every now and then I like to present 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, and (b) how we believe that loans should be presented. Keep in mind that this is only the initial summary, and that it must be followed up by the relevant supporting documents.
Kristopher Gillmore
Fairfield Financial Services, Inc
16055 SW Walker Road, #247, Beaverton OR 97006
Phone (503) 319-7294 / Fax (503) 419-4219 / E-mail: gillmore@privatemoneysource.com
REAL ESTATE PROSPECTUS
SECURED LOAN
Purchase and renovation of a Single Family Residence in Austin TX.
Loan Details
- Loan Amount: $85,000
- Term: 12 Months
- Interest Rate: 12%
- Monthly Payments: $850.00 Interest Only
- Security: Deed of Trust in 1st Position security interest in real property located at yyy, Austin TX 78753
- Construction Holdback Account: 20,000
- Projected Value by Appraisal: $126,000
- Projected LTV based on Appraisal: 67%
Loan Overview
Xxx is a real estate investor and is requesting funds for the purchase and rehab of this Single Family Residence in Austin, TX. This is his first fix and flip project, but he does have experience in rehabbing residential property. Xxx purchased a 4-plex in disrepair, renovated the property, and is currently living there while renting out the other units, allowing him to live there for free with a small positive cash flow.
Xxx will be making a $13,000 down payment, and will exit the loan with the sale of the house. Note – given the borrower’s debt to income ratio and credit score, it seems like a conventional refi would be an option as well, should he have difficulty in selling the house.
Property
The subject property is a 1,000 home built in 1964. The lot it 8,411sf, and the house has 3 bedrooms with 1.1 baths. The property is in disrepair, although reported to be structurally sound (a certified home inspection report is pending).
The borrower will be hiring a licensed contractor to paint the entire house inside and out, redo the flooring, replace the fixtures, roof work, countertops, etc… The borrower will be doing the landscaping work himself. It should be noted that the budget as included in the appraisal is more extensive than the work that will actually happen. That budget includes the removal of walls and reconfiguration the pantry area. The borrower belies that staying with cosmetic updates will yield the same value and be more appropriate given the style and age of the property.
A revised budget has been provided in the full packet. Note – although the bid for the repairs is $14,683, the total holdback will be $20,000 to allow for a contingency and funds for landscaping.
Valuation
Two appraisals have been provided by the borrower. The 1st is a more formal appraisal, with an actual site visit. The 2nd is a desktop appraisal with computer generated comps and no site visit. For the purposes of this report, the appraisal with the site visit and lower estimated value has been used for all LTV calculations.
The comps provided in this appraisal seem fairly homogenous, and appear reasonably comparable as far as size, style, condition, location, etc…
The appraiser suggests a projected value of $126,000 after the proposed repairs. – Note – the list of repairs supplied to the appraiser is more extensive that what is actually being done. The borrower believes that the repairs as provided to the appraiser would not provide the additional value to warrant such repairs, and that more modest updates would yield a similar value and stay more in line with the age and style of the house.
Income
A signed 1003 has been provided in which the borrower states a monthly income of $4,438. His only real asset is a 4-plex in which he resides, while renting out the remaining units, resulting in a net cash flow of $105/month. With his outstanding debt (mainly a student loan), he’s showing a negative net worth. That being said – he does have a fair amount of equity in the 4-plex (Approx. 60K).
Chris reports his total monthly obligations as $1,125, which would increase to 1,975 with this loan. Based on these numbers, his ability to service the debt from this loan seems reasonable. If the sale of the property turns out to not be a feasible option, his debt to income ratio would open up the possibility of a conventional refi.
Credit
A recent credit report shows a mid-score of 686. There are no 30 day late payments reported and all of his accounts are current.
—end of prospspectus—
If you have questions about this prospectus, or if you have similar loan files that you would like to pursue, please contact us via e-mail, phone, or comment.
– 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
