It took just about a week, but my funds from HML #17, which closed on the 21st, have found a new home.
Our best borrower picked up a triplex at a foreclosure auction. The property is in San Lorenzo, California and went at auction for $331,000. Our loan is for $210,000. The property square footage is about 2,600 although the MLS listing for it does not give a square footage.
As we did with the last property, we pulled comps using both residential and income property searches on the MLS. Income property comps show up at $315,000 for a 4-plex that is smaller than the subject property and another 4-plex listed at $725,000 but that's bigger than the subject property. There is a triplex that sold recently for $329,000 that was smaller.
On the residential comp list, we had about 12 properties, all that were smaller than the subject and all on smaller lots. Highest priced one sold for $335,000.
Based on rents of single family homes in the area, my partner estimates the monthly rental income to be about $1,200 per unit. (The subject property is really a single family house with a duplex in back.)
Our borrower estimates the property to be worth $500,000. I'm not sure how he gets a figure that high, but he knows the area better than me and comps are pretty hard to come by, as usual for triplexes. The property has tenants in place and they have indicated they want to stay. We have not seen the inside, so we don't know the condition. The roof appears to need some work. Our borrower has experience in the area - he actually rehabbed the property right next door, which is a 1,000 square foot SFH that he sold for $280,000 back in August. My partner was his lender on that project too (although I wasn't).
Our LTV based on the sales price is 63%. Should we have to take over the property, we'd get an income-producing property generating about $29,000 per year for $210,000. Not bad. Our loan terms are our standard - 12% interest only loan, 1 year term. And with this deal, all my funds are fully invested again!