Fairfield Financial Services, Inc. - Private Money Loans, Lending & Borrowing

The Private Money Broker

Article: Four things you need to flip a house

July 12th, 2016

Clay Sparkman
I came across this article by Justin Pierce, Four Things You Need To Flip A House, in Special to The Washington Post. It is well written and touches on some relevant/important points with regard to the matter of home-flipping. Since this is our sweet spot as a private money lender, I thought it would be appropriate to share this article with the various brokers and real estate investors who read this blog.
If you would like to discuss private money loans further or run a particular scenario by us, contact Clay via e-mail at clay@privatemoneysource.com. Otherwise, if you would like to get a better feel for our company and the types of programs we do, please browse our web site at http://www.privatemoneysource.com.
– 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

The art of the summary

July 5th, 2016

Clay Sparkman

The Art of the Summary

Between phone calls, emails, and on-line submissions, we receive a tremendous number of loan requests. It’s pretty common for these loans to have tight deadlines, so here are three ways to speed up the process.
1)      Use the on-line proposal form and provide all the applicable information.  This form can be accessed through our web-site Here.  This form provides us with everything we need to know to issue you a quote. It’s very effective.
2)      Leave a description of the loan transaction in a voicemail. (Note: I’ve spent days playing phone tag with brokers, only to find out that they were looking for a loan in a state that we didn’t lend in. If we get a detailed voicemail, we can respond more rapidly to the various aspects of your request.)
3)     Send me an e-mail with a summary of the loan. This can be an efficient way to submit a loan request, and we can evaluate a good summary very quickly. However, that’s not always the case. If the information is lacking or hard to find, it will delay the process. We’re looking for a summary of the loan request, not pages of detailed documents. Here’s a list of information that we like to see:
The Property
– Property location
–         Specs on the property (Type of property, SF of building(s), description of property, size of lot/land, etc…)
–         Purchase Price and/or amount owed
–         As-Is Value and ARV
–         Amount needed for repairs (if applicable)
–         Amount of money invested thus far in the property
The Borrower
–         Monthly income
–         Net worth
–         Credit score
–         Relevant experience
The Loan
–         Broker fee(s)
–         Net amount of funds required for the borrower
–         Amount available for down payment
–         Use of funds
–         Closing deadline
–         Requested term of loan
–         Exit strategy (This is very important.)
A good summary should highlight the features of the loan without the reader having to hunt for information. By providing this information in a clear concise format, it will speed up our review time and ultimately close loans faster.
If you would like to discuss private money loans further or run a particular scenario by us, contact Clay via e-mail at clay@privatemoneysource.com. Otherwise, if you would like to get a better feel for our company and the types of programs we do, please browse our web site at http://www.privatemoneysource.com.
– 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

Private money loans – a broad perspective

June 27th, 2016

Clay Sparkman
I came across this article, Private Lending Presents Opportunities for Investors by Jeff Brown, in US News. It gives a very broad perspective on private money lending. For example, it includes references crowd-sourcing and unsecured loans. I thought it might be worth sharing with you all, as you contemplate your options for non-bank loans.
Here
Check out our website for details re our loan criteria, our packaging guidelines, and our process.
www.privatemoneysource.com
I encourage you to sign up and give it a try. The real estate market is up and rising, and we are just now entering a new fix and flip season.
All the best in your endeavors, Clay
– 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

Promotional offer #2 for real estate investors

June 14th, 2016

Clay Sparkman
We are running several new promotions, primarily aimed at real estate investors, to really get costs down on financing and thus open up the possibility for more profitable deals. Last week I put up a blog post about a 12% and 2 point offering.
This week I’m putting up an alternative offer: 7% and 7 points.
As a private money rehab and property investment lender, we are able to provide a variety of creative solutions that are just not available via more conventional sources. If the parameters and circumstances are right, we are also able to overlook a number of issues that might be problematic with more structured lenders. Small to medium rehab loans are one of our sweet spots, and we are geared up to make as many as we can this season.
We are offering a significant cut in the cost of our premium loans. Our regular charge for a 12 month construction loan is 5 points and 10-12%–the rate dependent on the particulars of the loan.
Starting immediately, and for a period of six weeks, We are offering (via brokers and direct to borrowers directly) one year rehab, construction loans, and investment property loans on of up to 60% LTV, priced at 7 points and 7%. (We will even consider a longer term, up to 2 years, if the circumstances warrant it.) Also note that we charge no prepayment penalty.
The conditions are as follows of this promotion are as follows
(1)   You must register with FFS by sending an e-mail to clay@privatemoneysource.com with “PROMO-SEVEN-AND-SEVEN” in the subject line and your name, company name, and phone number in the body of the e-mail, no later than 6/30/16.
(2)   You must submit a summary of your loan no later than 7/7/16, and FFS must approve the summary.
(3)   You must submit a complete loan packet, as required by FFS, no later than 7/14/14, for the same loan for which you submitted a summary in June.
(4)   The minimum loan size for this promotion is $150,000.
(5)   The loan must close no later than 7/29/16 .
Check out our website for details re our loan criteria, our packaging guidelines, and our process.
www.privatemoneysource.com
I encourage you to sign up and give it a try. The real estate market is up and rising, and we are just now entering a new fix and flip season.
All the best in your endeavors, Clay
– 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

Promotional offer for real estate investors

June 8th, 2016

Clay Sparkman
We are running a new promotion, primarily aimed at real estate investors, to really get costs down on financing and thus open up the possibility for more profitable deals.
This is the best that we have ever offered, and we are running it in order to bring in new borrowers and give them the maximum opportunity to succeed at their venture(s).
As a private money rehab and property investment lender, we are able to provide a variety of creative solutions that are just not available via more conventional sources. If the parameters and circumstances are right, we are also able to overlook a number of issues that might be problematic with more structured lenders. Small to medium rehab loans are one of our sweet spots, and we are geared up to make as many as we can this season.
We are offering a significant cut in the cost of our premium loans. Our regular charge for a 12 month construction loan is 5 points and 10-12%–the rate dependent on the particulars of the loan.
Starting immediately, and for a period of six weeks, We are offering (via brokers and direct to borrowers directly) one year rehab, construction loans, and investment property loans on of up to 60% LTV, priced at 2 points and 12%. (We will even consider a longer term, up to 2 years, if the circumstances warrant it.) Also note that we charge no prepayment penalty.
The conditions are as follows of this promotion are as follows
(1)   You must register with FFS by sending an e-mail to clay@privatemoneysource.com with “PROMO-TWELVE-AND-TWO” in the subject line and your name, company name, and phone number in the body of the e-mail, no later than 6/23/16.
(2)   You must submit a summary of your loan no later than 6/30/16, and FFS must approve the summary.
(3)   You must submit a complete loan packet, as required by FFS, no later than 7/7/14, for the same loan for which you submitted a summary in June.
(4)   The minimum loan size for this promotion is $150,000.
(5)   The loan must close no later than 7/22/16 .
Check out our website for details re our loan criteria, our packaging guidelines, and our process.
www.privatemoneysource.com
I encourage you to sign up and give it a try. The real estate market is up and rising, and we are just now entering a new fix and flip season.
All the best in your endeavors, Clay
– 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

how 2-4 unit properies might be utilized (and financed)

June 1st, 2016

Clay Sparkman
Here, in The Scotsman Guide, is an article with an interesting take on regulations for financing of 2-4 unit properties and how private money might be utilized in a supporting role. I thought it might interest most Brokers and RI Borrowers. (By the way, if you are not familiar with it, The Scotsman Guide is an excellent resource.
Read here
Comments are always welcome.
– 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

Visualizing the industry

May 19th, 2016

Clay Sparkman
With regard to forward thinking (that is, how is the industry changing?): I thought you might appreciate this article, Private Lending Sector Making Big Noise for Real Estate Investors, by Ben Stoodley:
Here
Certainly he is correct with regard to his interpretation of current trends, and one must wonder how far this might all go.
Comments are always welcome.
– 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

Three potentially useful indicators of the likely movement of value

May 11th, 2016

Clay Sparkman
Any good real estate investor should be attempting  to assess whether property values are rising, falling,  or holding in the area of his/her latest potential investment. After all, the core question when buying investment property (particularly short-term) is, “what is value likely to do in the next year or so?” If you sense that values are likely to fall in a certain investment region, you had better take that into account when deciding whether or not to invest, and for how long. And if you decide to invest, given this information (whatever it may lead you to believe), you will be able to better assess your investment risk, potentially reward, and appropriate strategy.
The direction of property values is not an easy thing to predict, but if one really wants to inform themselves with regard to what property values might be doing in the near future, than there are three pretty good things to look at.
But first, what not to count on: If you are looking at whether or not property values are rising, falling or holding today, just remember that this is a trailing indicator. At best it will tell you what is happening now, and even worse, it may be a better indicator of what happened several months ago. Look at this info, but don’t take it very seriously as an indicator of what is going to happen next.
And so, here are three leading indicators that I would recommend you consider:
(1) The rural test: Ask  yourself what property values are doing in rural (or more remote) areas. Those values tend to lead the values of properties in more concentrated areas. So, if you are suddenly witnessing a notable fall in values in rural areas, chances are that other values in the region will follow.
(2) The time-on-market test: Determine what the average time on market is as you assess potential opportunities . For residential properties 3-6 months is fairly normal, and would tend to indicate that values will be holding for awhile. Last time I checked in Portland, the average time on market for residential properties was 1.7. This is a very low number and a very good indicator that values are on the rise.
(3) Look at the ratio of replacement cost to purchase price. If the ratio of replacement cost to purchase price is high, then property values are likely to rise, at least for the near-term future.
Let me know if you have any other indicators that you use. We would like to hear about them.
– 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

Home flipping

May 5th, 2016

Clay Sparkman
As you know, our sweet spot is for loans to real estate investors. In particular, we do a lot of fix and flip, fix and hold, REO, short sale , and new construction.
I feel that this recent Washington Post article, by Justin Pierce, “The four things you need to know to flip a home.” is a good article, and as such, I would like to share it with the community of those who invest in real estate and/or provide resources to those who invest in real estate.
The article is here.
I hope you find it useful, and always, I’d be interest in your input/feedback.
Thanks,
Clay
– 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

Our sweet spot: Rehab and Constrcution loans

April 21st, 2016

Clay Sparkman
One of the most promising areas at the moment for real estate investors and brokers, by all indications, is new construction, REO, short sale, rehab, and quick flip properties.  The opportunity to buy distressed properties at a low price point is evident in many markets.  And yet it is difficult for most end-buyers (with a non-profit initiative) to take advantage of these opportunities, as they are not prepared to deal with the financing challenges or the rehab work involved when buying one of these properties.  Thus comes a wonderful opportunity for those real estate investors who can size up a market effectively, move to buy challenged properties at below value prices, rehab them quickly, and get them back onto the market at a slightly below market price.
Another point in favor of this brand of real estate buying/investing:  Real estate investors who either (a) buy and sell quickly or (b) hold for the long haul are not as likely to get hurt by falling market values.  It is those who are planning to hold a property for 2+ years that are in the most danger.
And as we know, what is good for the borrower in this business is generally good for the lender as well. These types of loans may be some of the best that private money lenders can expect to see for the next year or two and thus the easiest to get funded.
With these thoughts in mind, it seems appropriate to duplicate here the Rehab and Construction loan FAQ that I publish on my company website.
We tend to receive an endless parade of questions from brokers, borrowers, and investors as to how to best structure these types of loans, so here is an example (representative, I think, of private money organizations in general) of how one organization goes about it.

REHAB AND CONSTRUCTION LOAN FAQ

What is your maximum LTV ratio for rehab and construction loans?
Well, it is important to talk about front-end and back-end LTV, because this is one of the most important parameters in our decision making process. Our maximum back-end LTV is generally 65% (though in certain cases we may go as high as 70%).
What do you mean by “back-end LTV”?
By back-end LTV, I mean the LTV at the completion of the project. For example: let’s say a borrower needs $90,000 for the acquisition of a property and $20,000 for construction funds and thus wishes to borrow $100,000 (he’s coming in with the rest at closing: $10k + loan fees and closing costs). If the completion value of the property is conservatively figured at $175,000 based on comps provided by the borrower, the back-end LTV will be 110/175 or 63%.
Do you require an appraisal?
For rehab projects, rarely ever do we ask for an appraisal. We know that professional investors must move quickly and that they are frequently the best source for data regarding the projected value of their project. If an investor tells me that he expects to sell a property for $200,000 upon completion, I say, “Show me how you have come to this conclusion.” A good set of comps is frequently an adequate substitute for an appraisal (though not always). (With construction projects, it is a little tougher sometimes to get a handle on the completed project, so on occasions we will ask for an appraisal.)
Are you able to loan 100% of hard costs?
Occasionally, though the borrower would have to cover the soft costs out of pocket. It really depends on three factors: (1) How strong is the borrower financially? (2) How well is she buying? And (3) How much relevant experience does she have?
How does the construction money get disbursed?
At the close of the loan, the construction funds are held back in a client’s trust account by FFS. From time to time, as a borrower completes the construction of a project, the borrower will submit a draw request to Fairfield Financial. Fairfield will review this request and, upon approval, release funds either directly to the subs/suppliers (if requested to do so) or to the borrower (if the borrower has already paid the subs/suppliers). Fairfield is responsible for ensuring that (a) the work is completed to an appropriate quality standard, (b) the project is on-budget (or if not on-budget, appropriate adjustments are made), and (c) that all subs and suppliers get paid for their work on the project. Borrowers are encouraged to make as many draw requests as they require, and if a request is complete, and deemed to be valid by FFS, we can generally disburse funds within 48 hours.
How much experience do you require from the borrower?
Well, it is nice to see a borrower come in with moderate to substantial experience, but I have learned over the years that success in this business isn’t as much about experience as it is about common sense and the willingness and the ability to work tenaciously toward the completion of a project. So if you don’t have experience but you can show me that you have the drive, the discipline, and the common sense, we’ll give you a chance.
What sort of credit and financial stability do you require from the borrower?
We don’t have specific underwriting guidelines. As far as credit, I am not looking for a perfect credit score (though we do have quite a few borrowers with credit scores in the mid-to-high 600s and 700s). I am looking at a pattern of payment over time. If a person has had a few bumps in the road or even a BK, for example, along the way, this doesn’t bother me. What concerns me is the borrower who has consistently shown a disregard for debt obligations over a period of time. I probably won’t want to get into a project relationship with this person.
Regarding financial strength (net worth, income, and liquidity), my primary concern is seeing that the borrower has either enough income (stated) or enough cash or liquid assets (stated) to get through the project (even if setbacks occur). That means showing the capacity to make payments for the duration of the project (if an interest reserve account has not been set up) and to deal with the situation if it becomes necessary to weather a few bumps in the road if the project doesn’t go exactly as planned. Beyond that, we don’t expect our borrowers to have any great wealth. We know that they are in the process of attempting to build something, and sometimes that starts from practically nothing.
What is the term of your loan and how are the payments handled?
The term of the loan is generally one year, though if a project is expected to require longer, we can make a loan for two years or more. Payments are made monthly and are interest-only. If there is enough equity in a project, we can arrange to have some number of payments held in reserve and applied to the loan for the initial period of the project.
What are your rates?
For this sort of thing, rates generally range from 11% (sometimes 12%). The rate is determined by (a) the LTV, (b) the strength of the borrower, (c) the amount of leverage involved, (d) the merits of the overall project, and (e) the perceived volatility of the local market.
What fees are involved?
We charge a loan fee equal to 5% (under certain conditions, this may be 4%) of the gross amount of the loan. We also charge a doc prep fee (which ranges from $675 to $2900, depending on the size of the loan; for example: 675 for a loan of $150k or less), an account setup fee (which is $470 plus $1/$1000 of the loan amount), and a property inspection fee (which is typically in the $500-$1000 range, but may be more if the property is far from our central location in Portland, Oregon). There are no hidden junk fees.
Is there a pre-payment penalty?
Typically, there is no pre-payment penalty.
What is the approval process?
There are basically four steps.

  1. The borrower (or a representative for the borrower) runs the project concept by us. If we like the project concept and feel that the numbers are acceptable, we proceed to the next step.
  2. If the project conceptually makes sense to us, we produce a quote, listing all of the relevant costs and other information for the requested loan.
  3. The borrower signs off on the quote.
  4. We review a complete loan packet. We ask that this be sent via overnight mail or delivered to the office (fax copy is not acceptable). An electronic packet is acceptable, provided that all items are in a single packet (either Word or Adobe). The packet should include the following items:
    1. 1003 for each borrower/personal guarantor
    2. Credit (tri-merge) for each borrower/personal guarantor (or permission to pull credit)
    3. Company financials if the borrower is an entity (2 years)
    4. A privacy notice signed by the borrower
    5. A purchase agreement (when property acquisition is involved)
    6. A preliminary title report
    7. A detailed line-item budget for all construction work to be done on the project
    8. Plans (for all construction loans, and for rehab loans that involve changes in the basic floor plan)
    9. Borrower’s estimate of the completion value of the project, and comps (or other value analysis) to support this estimate
    10. Photos of the subject property
    11. Borrower credentials
    12. A copy of contractor license, bond, and insurance (for all construction loans)
  5. If all this checks out, we ask the borrower for a deposit (generally somewhere between $500 and $1500). This should be in the form of a cashier’s check or money order. We provide a conditional loan commitment letter at this time.
  6. If the property checks out, we draw up the documents and close the loan through escrow.

Is the deposit check refundable?
If we close the loan through escrow, the deposit is applied as a credit to the loan fees. If we don’t close the loan because (a) the borrower does not or cannot perform or (b) the project upon inspection is significantly different than as represented, we keep the deposit to reimburse us for our costs. Otherwise, if Fairfield fails to perform for any reason, we return the deposit to the borrower.
How long does it take to put the loan together?
We generally ask for a minimum of two weeks from the time we review a project packet until closing.
– 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