Featured LoanCOVID-19 Impact On High-Leverage Fix and Flip + Rehab Financing
Loan Amount: $795,000
Loan-To-Value: 83% Purchase + 100% Rehab
Situation & Challenge
An experienced real estate investor was in contract to buy this fixer upper in Los Angeles using higher leverage Fix and Flip + Rehab Financing. By mid-March, the numerous lenders throughout Southern California that had been providing house flippers 80/100 to 90/100 Fix and Flip + Rehab Financing by originating loans and immediately selling to secondary market, were notified that the secondary market buyers had temporarily stopped buying loans until they could assess the impact of the COVID-19 pandemic.
Solution & Result
FCTD did source another Fix and Flip + Rehab lender that would fund 80/100 on this property – with a catch. The borrower would have to fund a 12-month interest reserve (12 payments) into an escrow account to ensure timely payments in case the economy and housing market deteriorated deeper. For the buyer, that option wasn’t as attractive so they chose to cancel the purchase.