The two most important factors hard money lenders consider before making a fix and flip loan are the property value (as-is, purchase value, and After Repair Value (ARV) and the borrower (experience, cash on hand, experienced adviser, etc).
In this situation, the buyer had done a great job negotiating a discounted purchase price, which was about 15% below as-is value. The home was in a great neighborhood in Fullerton and on the same street as another property FCTD had financed with this Los Angeles based lender a six months earlier. That loan had was paid off and the house flipper investor made a six figure profit. So the property value was safe.
The other factor was the borrower’s experience and liquid assets on hand to complete the fix and flip project. Even though this was the borrower’s first house flip, they had a family member who happened to be a general contractor heading up the renovation project, which saved time and money. Plus, the GC family member running the show also mitigated the growing pains and expensive mistakes many first-time house flippers experience.
80% LTV Fix and Flip Financing Terms:
- $290,000 Loan Amount
- 11.00% Interest-Only
- 12-Month Term
- No Prepayment Penalty