Got some emails yesterday for two new hard money opportunities from my partner in California. I only have the funds available for one right now, unfortunately.
The deal I chose is a first mortgage on a property in Castro Valley, CA. The property is a 1,500 square foot duet, built in 1979. (A duet is similar to a duplex in that it is two units that share a common wall. However, unlike a duplex, the units can be owned by different parties.) The property was bought at a foreclosure auction by two professional rehabbers. They already have a mortgage on another property with my partner and they are paying on time on that one.
The rehabbers bought the property for $254,000. My partner estimates it will take about $20,000 to fix up. Comps are conservatively valued in the $320,000 and up range. There is one comp that is currently on the market listed at $339,000, although it has been on the market for 2 months, so that might be a tad high. Another comp is in the sale pending status with a price of $299,000. Our property is in a better location, however. The defaulted mortgage was in the amount of $325,900, but the lender started the auction bidding at $198,900. The price was bid up to $254,000, which is the price the borrowers got it for. We are writing a mortgage for $192,600, which is a 75.8% LTV, using the conservative comp figure. Terms are the usual - 10% net to me, the investor (borrower is paying 12%, but my partner keeps 2% as a service fee), interest only payments due monthly, loan term is 1 year. There is an incentive for the borrower to pay off the loan early.
The rehabbers purchased this property on 11/16 and on 11/17, my partner visited the property. There were already workers in there rehabbing the place, so they are not wasting any time on this.
I'll refer to this investment as Hard Money #10.
In other news, hard money loan #9 may be wrapping up soon. The property is in escrow now. We estimated the property to be conservatively worth $330,000 to $350,000. It was listed at $389,000 and it quickly got an offer for $410,000. Nice! The borrower bought it for $238,000 and put about $58,000 in improvements. He'll make a bit over $100,000 on this one in 3 or 4 months time. Nice! (of course, this assumes escrow closes..)