The current housing cycle has opened a very large window for real estate developers buying up older homes in prime location on large tracts to build some spectacular homes. Sometimes, the developers obtain bank financing on these projects. Other times, they use non-traditional financing, like this project where the developer used a 24-month private money loan for a Silicon Valley Mid-Century to build a new trophy home.
At First Capital Trust Deeds, where we specialize in hard money and private money financing. We work with many developers and real estate investors who specialize in the luxury home market. Since the process to obtain a loan is relatively fast, they primarily finance their projects with private money loans from lenders throughout California whose niche market is lending to the high-end or luxury developer. We’ve closed loans in San Francisco, the East Bay, Silicon Valley, and Los Angeles for several of these luxury home builders.
In situations where the project won’t break ground for 12-18 months, like this one, we placed the loan with a Northern California fund who offered a 6.99% | 7.99% (Year 1 | Year 2) stair step rate program. This kept the monthly debt service payments relatively low, which worked well for the borrower who would most likely be refinancing out of the loan in the second year into a construction completion loan.
24-Month Private Money Loan Terms:
- $1,000,000 Loan Amount
- 99% | 7.99% Stair Step Rate Program
- $5,825/mo (Year 1) | $6,658/mo (Year 2)
- 24-Month Term
- 9-Month Guaranteed Interest Period