A real estate investor used a 5-year private money loan for a California triplex that would be added to the borrower’s large portfolio of cash-flowing properties. First Capital Trust Deeds originates several 5-year private money loans with interest rates starting at 8.00% interest-only for investors who fall just outside the scope of conventional loan guidelines.
Over the past few years, we’ve worked with many investors, like the one who bought this cash flowing triplex in Northern California, to help them obtain this loan program for their rental properties. Most of our clients using this loan have had one of the following obstacles that knocked them out of Fannie and Freddie’s program:
- More than 10 conventional loans in financed
- Not showing a high enough of adjusted gross income (AGI) on their personal income taxes due to self-employment, depreciation on properties, and deductions from mortgage interest, property taxes, etc.
- Showing paper losses on taxes – part of AGI
- Too difficult to obtain a conventional loan – not worth the hassle – 45-60 days not worth the wait
- Wanted one loan at 8.00% Interest-Only for several properties (blanket or cross-collateralized loan)
- Needed to close within 5 days
For many of our clients who have used this loan program to buy or refinance their property holdings, this has been a pretty good loan. The 8.00% interest-only payment is the equivalent to a fully amortized payment at a rate of 7.025% per $100,000 financed. 7.025% is slightly higher than today’s conventional investment property rates in the 4.00% to 5.00% range (which our clients of course cannot qualify for due to one of the reasons listed above), but lower than the 12.00% hard money loans that many of our clients had used to originally acquire some of their investment properties.
For this Northern California investor who bought this discounted and fully rented out triplex, the terms and and 5-day closing worked out really well.
5-Year Private Money Loan Terms:
- $100,000 Loan Amount (80% LTV of Purchase Price | 58% of Lender Appraised Value)
- 8.00% Interest-Only
- $667/Month Payment
- 5-Year Term
- Sliding Scale Prepayment Penalty During First Three Years
- Loan Closed Within 5 Days of Accepted Offer