A San Francisco based real estate investor came to First Capital Trust Deeds needing to quickly close a hard money loan that provided both acquisition and construction financing for this dilapidated home in an up and coming part of the city.
With the right experienced borrower, like this one, on a well sourced property with tremendous upside profit potential, closing the loan within ten days was more than doable. The borrower elected to go with a “65 | 80 Split” with the hard money acquisition loan at 65% loan-to-value (LTV) and construction financing at 80% of the $280,000 renovation costs using a standard 12-month term.
The borrower liked the terms along with FCTD’s ability to close quickly. With $270,000 acquisition plus $225,000 construction financing, interest started accruing immediately after closing on the entire loan amount, $495,000, even though construction funds were not yet released. This is pretty standard for residential 1-4 hard money acquisition plus construction rehab loans. With the lenders that FCTD works with in California, borrowers pay interest on the total loan amount from day one even though construction funds are held in an escrow account.
The trust deed investor, a Southern California private mortgage fund, liked the buyer’s prior experience and the future potential of this property when fully renovated to resell at approximately $1,100,000.
Acquisition + Construction Financing Terms:
- $270,000 Loan Amount (65% LTV)
- $225,000 Construction Fund Control (80% of $280,000 Rehab Cost)
- Equals $495,000 Total Loan Amount for a $425,000 purchase
- 12-Month Term
- No Prepayment Penalty
- 1 Point Cost to extend the loan an additional 3 months