Challenge: This home in a nice neighborhood needed to be updated and renovated with a modern look. The buyer had flipped a property before but didn’t have an extensive track record under their belt, so they weren’t able to qualify for the 80-90% Loan-To-Value (LTV) of purchase price financing that FCTD often secures for buyers in Los Angeles.
How much of a hard money loan could he finance on the $230,000 purchase price?
Solution: Answer: 75% LTV on the purchase and it could close quickly within 4-5 days. If the buyer had a little more experience (3+ successfully flipped properties) and needed higher leverage, we could have done 85% LTV on the purchase. Instead, the buyer had enough down payment to go with a 75% LTV hard money loan.
The buyer was happy to close the transaction within one week. For the trust deed investor, 75% LTV was a comfortable position to be on a first trust deed. at 11.00%. They expected that the borrower would be able to make renovations and resell the house within 6-8 months, which is a pretty standard duration for fix and flip hard money loans held in this particular lender’s loan servicing portfolio.
Hard Money Loan Terms:
- $172,500 Loan Amount (75% LTV)
- 12-Month Term
- No Prepayment Penalty