First Capital Trust Deeds secured the high-leverage hard money fix and flip financing for an investor acquiring this Palm Springs area short sale. It was a rather simple transaction for an experienced house flipper with a lengthy track record.
Because the profit margin was going to be pretty slim, the borrower chose to go with an origination expense structure of 1 point + $855 doc prep/valuation at 12.00% interest-only for the 12 month period. Going with the lower upfront costs and the higher interest rate saved the real estate investor money when they resold the property 3-4 months later. And on the lower priced homes, it made more sense to structure the financing this way as opposed to higher upfront costs with a lower interest rate.
We work with several experienced house flippers in California focused on the $100,000 to $300,000 price range that use this pricing structure. They like keeping the upfront costs to a minimum when they know that the house will most likely resell within 3-4 months to a first-time home buyer. A buyer coming in with either a FHA 96.50% LTV financing or a Fannie/Freddie 95-97% LTV buyer, which require 90 days to pass from the most recent title transfer, which would be when our house flipping borrower client acquired the property.
High-Leverage Hard Money Fix and Flip Financing Terms:
- $215,000 Loan Amount (79% LTV)
- 12-Month Term
- No Prepayment Penalty