I could be Walter Mitty and exaggerate the heroic efforts we needed to overcome in order to provide the owners of this beautiful westside rental property with a private money second mortgage but that would be false. The property had millions of dollars of equity, the first mortgage had an ultra-low rate, and the rental income more than serviced the carrying costs of the property. It was a second mortgage opportunity that most trust deed investors would want to fund.
The reason for going with a private money second mortgage rather than getting a ultra-low interest rate home equity line of credit (HELOC) at a bank is the self-employment with investment real estate issue. You can read about it here in one of our previous posts. The self-employed real estate investor with a low Adjusted Gross Income (AGI) has been persona non grata in the mortgage world since 2008. It’s not easy to get a traditional first mortgage and can be nearly impossible obtaining a cash-out second mortgage on an investment property, even when there is $3,000,000 in protective equity like we had here.
The property owner was able to get a decent private money loan within five days providing very little financial documentation beyond a loan application, credit report copy of the rental agreement, and a trust deed investor site inspection. We know it’s not a low rate HELOC from the bank, but it got the borrower the money needed quickly to pursue other real estate investment opportunities. The trust deed investor was able to fund an excellent $430,000 loan at 10.50% with $3,000,000 of protective equity as a cushion. This loan worked out really well for both parties.
Private Money Second Mortgage Loan Terms:
- $430,000 Loan Amount – 33% Combined LTV
- 10.50% Interest-Only
- 36-Month Term
- 6-Month Prepayment Penalty
- No Appraisal Necessary/Investor Site Inspection Only