Lending on Real Estate has always been a steady source of income for the wealthy since medieval England when the gold peddlers began lending to their lords to finance war expenses and collateralized their investment with liens on royal land. The practice of lending money that is secured by property has been in practice for thousands of years, nothing nonfunctional lasts that long. With the current mortgage/real estate market crash many are fearful of lending against Real Estate because of concerns about plummeting value and the dreaded "F" word coming up in everyday conversation. This widespread fearful mindset presents a dearth of opportunities for the sharp and contrarian-minded investor. Hard money trust deeds (a.k.a. mortgage for you non-Californians) are typically lent at 60% or less of a properties' fair market value- That's usually less than Zillow, people. Often times hard money lending will also factor in the income of the property and therefore the ability to make loan payments. If both of these factors are carefully assessed before making an investment in a trust deed, the investor will almost always make a giant yield and have a low risk return on monies invested. Consider the first investment listing below on a commercial property in Orange County. The property appraises at $2,600,000. The 1st trust deed is for $975,000 making it 39% loan-to-value.
J.P. Getty said when asked about evaluating business decisions "I always ask myself what is the worst thing that could happen in this situation. When I've determined what the worst possible outcome could be and consider that outcome acceptable I will commit to the venture and make darn sure that outcome doesn't happen."
Let us consider this properties' worst case scenario. If the borrower defaults on this loan, the lender would foreclose on the property and have plenty of padding between the sales price and the amount of money invested. Let's say the lender decides to sell the building for 70% of it's appraised value. That is a sales price of $1,820,000. Paying $20000 in seller's closing costs will net the lender $1,800,000. Now in California law, the lender is not allowed to keep all the proceeds of the sale in a foreclosure. The lender is entitled to the full repayment of their investment plus all expenses, carrying costs until the sale and pre-agreed interest, if applicable. The remainder is refunded to the borrower. Typically the lender will collect expenses from 5% to 11% of the loan amount on a commercial loan. With such a large cushion of equity, trust deed investments can be very secure and conservative investments. (Considering the state of the banking industry, some might argue that they are more secure than money in the bank!!.)
In keeping with the spirit of Getty, let us make certain that the worst case scenario doesn't happen. We will ensure that by looking at the income of the property and the ability of the property to pay the note. The note will be $10875 per month. Property taxes are another $2705 per month and insurance will be at most $500 per month. With the existing income of $16000, and total monthly payments of $14080 the income from the property alone can easily service the monthly obligations on the proposed trust deed and thus old J.P. is satisfied.
To invest in trust deeds in California, contact us at 310-709-8283 or my mortgage website. The listings below are a smattering of what comes across our desks weekly.
Available Trust Deed Investments
October 13, 2008
Trust Deed Investors,
Below is a list of all Trust Deed Investments currently available. Some TD's are completed and available for immediate investment purchase and others are still in process and have not yet been funded.
*Loans that are not yet completed may be negotiable (ie: loan amount, interest rate and other terms).
To connect with these investments contact me at 310-709-8283.
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1st T.D. -$975,000 (Santa Ana, CA)
santa ana ca Term: 5 years
Rate: 12%
LTV: 39%
Appraised Value: $2,500,000
Address: 1535 East 17th Street
Santa Ana, CA 92705
Comments:
Low LTV loan. Property generates approximately $16,000 monthly gross income. Purpose of loan is to pay off existing 1st mortgage that is due. Loan amount may be lowered to $775k and a $200k 2nd may also be arranged to go behind this loan.
1st T.D. - $55,000 (Oakland, CA)
davis oakland Term: 36 months
Rate: 13.99%
LTV: 39%
Prepayment Penalty: 1 year
Formal Opinion of Value: $140,000
Address: 426 Gramercy
Oakland, CA 94603
Description:
SFR Rental property that generates $950 monthly. Borrower has great credit and has owned the home for 8 years. LTV is very low at 39%. Purpose of loan was to do improvements to property. Loan was funded and ready for immediate purchase.
1st T.D. - $50,000 (Lakewood, WA)
lakewood WA Term: 36 months
Rate: 11.99%
Formal BPO Value: 160,000
LTV: 31%
Prepay: 2 years * Investor to receive 1 year perpaid interest in advance!
Address: 14503 Washington Ave., Lakewood, WA
Description:
Rental property that generates approximatley $600 monthly. Purpose of loan is for improvements and pay a few consumer debts.
1st T.D. - $67,000 (Roswell, NM)
clark NM Term: 36 months
Rate: 13.5%
Formal BPO Value: $175,000
Prepay: 2 years. 6 months prepaid interest to investor.
Address: 413 Tierra Berrenda, Roswell, New Mexico
Comments:
Purpose of loan was to pay off consumer debts.
1st T.D. - $175,000 (Roswell, GA)
kidd GA Term: 36 mos
Rate: 12.50%
Prepay: 1 year
BPO Value: 360,000
LTV: 49%
Address: 4147 Edinbergh Trail NE, Roswell, GA
Comments:
Rental property. Borrower as excellent credit. Rental property. Purpose of funds to purchase other investment properties.
1st T.D. - $50,000 (Honolulu, HI)
Comments:
Information will soon be available!
Thank you.
1st T.D. - $240,000 (Alta Dena, CA)
tilman BPO Estimated Appraised Value: $480,000
Term: 24 months (negotiable)
Rate: 12% (negotiable)
LTV: 50%
Address: 2261 Lincoln Ave.
Alta Dena, CA 90278
Comments:
Two structures, one home and a small market in rear on a large lot. Lot is C-3 zoned. Purpose of loan is to repair both structures so they can be rented out. New loan will also pay off existing $165k 1st TD. Projected rents: $2000-front home, $800 rear structure. *Value should be confirmed. A new appraisal can be ordered.
2nd T.D. - $175,000 (Bell Gardens, CA)
bell gardens industrial Term: 24 months
Rate: 12-14% (negotiable)
Existing 1st TD: $1.1MM Lehman Bros - good terms.
Recent Appraisal: $2,040,000
9 units Industrial Suites
CLTV: 61%
Address: 6750 Foster Bridge Blvd.
Bell Garden, CA 90201
Comments:
Owner had high 600 (good) credit. Purpose of loan is for another business endeavor. He generates over $12k in monthly gross income. Looking to net $150k. He has about $150k in the bank.
1st T.D. - $50,000 (Milwaukee, WI)
WI Term: 36 months
Rate: 12.99%
BPO Value: $125,000
LTV: 40%
Prepay: 2 years
Address: 6630 N. 84th St.
Milwaukee, Wisconsin
Comments:
Over 700 credit score. Rental property.
2nd T.D. - $350,000 (Rancho Palos Verdes, CA)
fernwood palos verdesRate: Negotiable (14%)
Existing 1st TD: $1.3MM Citimortgage - favorable terms
Terms of Loan: Negotiable
Completed Opinion of Value: $3.4MM-$3.5MM
CLTV: 49%
Address: 6061 Woodfern Drive, Rancho Palos Verdes, CA
Comments:
Property is a non-owner occupied SFR with panorama ocean views. Purpose of loan is to finish major remodel. Borrower has $500k of hi own money tied up in deal, needs appro. $300k to finish job, some interest carry and staging while property is listed for sale. Borrower says he has an offer on the table for $2.8mm, but wants to make as much as possible. He spent 9 months trying to purchase this proeprty that was previously in foreclosure.
1st T.D. - $435,000 (Los Angeles, CA)
Free and Clear Industrial Property(ies)!!!
Rate: 12% (negotiable)
Term: 24 months (negotiable)
Prepayment Penalty: (negotiable)
Property Description: Approximately 5800 square foot building built in 1971. Property is located adjacent to 4 or 5 other buildings that are nearly the same size. Borrower owns all buildings and lots.
Appraised Value: $675,000 of only single building, see below address. (Recently completeed Oct. 2008)
LTV: 65% - May be less if loan amount is lowered or loan is cross-colateralized by other adjacent buildings. This would significantly lower the LTV!
Address: 322 W. 131st Street, Los Angeles, CA 90061-1104
Comments:
Borrower has mid 600 credit scores. He has owned all of the buildings since 1959. He operates a plating company out of all buildings. Purpose of loan is to purchase a unique piece of equipoment that will allow him increase his business production and revenues.
1st T.D. - $90,000 (San Bernardino, CA)
Purchase Price: $71,000
Terms: Borrower would like 3-4 years
Rate: 12% (negotiable)
Value is $160,000 ( close comp at $180k)
LTV: 56%
Address: 773 Spruce Street, San Bernardino, CA
Description: 3 units
Comments:
Borrower is experienced buyer and investor. He has 700+FICO scores. Borrower has near $200k in bank. Property needs $20k to repair property. Ideally borrower would like to obtain $90k-$95 to cover purchase price and improvements. He can put money down and pay improvements, but the more he can finance the better. Borrower's opinion of value is at $160k, there is a close comp at $180k. Plans are to purchase, rehab, rent out hold. Anticipated rents $700-$800 per unit.
1st T.D. - $60,000 (Red Wing, MN)
mn Rate: 13.50%
Terms: 36 months
Recent BPO Value: $150,000
LTV: 40%
Address: 1230 Foursome St.
Red Wing, Minnesota 55066
Commments:
Rental property. More details available.
1st T.D - $85,000 (Palmyra, NJ)
nj deal Rate: 12.99%
Term: 36 months
BPO Value: $205,000
LTV: 41%
Prepayment Penalty: 2 year
Address: 514 Morgan Ave.
Palmyra, New Jewelry 08065
Comments:
Rental property. More details available.
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